Before contacting a financial institution for a car loan, take a look at your finances so you know how much you can afford to put toward a car payment each month. This is important to take into consideration before shopping for a car so you won’t end up with a payment that you can’t afford. The result of this is never good. When you can’t meet your payments, your vehicle can be repossessed.
If the car you are considering purchasing does not come with a warranty, you may also want to calculate the cost of an extended warranty into your monthly payments. This is a wise idea as it may protect your investment down the road.
There is a simple calculation to use to decide how much you can afford in a monthly car payment. First, take the dollar amount that you make from income each month. Subtract your expenses from monthly obligations from this amount. This includes credit card balances, utilities, housing payments, groceries, insurance and other miscellaneous expenses. After doing this, the amount of money you have left over is the amount you can put toward a car payment. It’s always smart however, to save a set amount of extra money each month for emergencies. Don’t go off what your lender thinks you can borrow. You are the one who knows can much money you can put toward a car payment.
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Published in by CARCHEX on April 8, 2015