Learn How to Create a Budget for Your Next Car

January 15th, 2018 by

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Learning how to create a budget for your next car can seem like an uphill struggle, but it’s really as simple as:

  • Determining your means
  • Coming up with a down payment
  • Working out your total costs

To make things that much easier, we’ve broken down each point. All you need to do is follow this guide to make a budget for your next auto purchase.
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Determining Your Means

Knowing how to budget money starts with working out how much money you have to play with. Work out your monthly post-tax salary, then consider:

  • Mortgage/rent
  • Food
  • Student loans
  • Other debts

These are hard costs you can do little to reduce. You should also think about your monthly budgets for entertainment, savings, or vacations. You should now know roughly how much you can spend each month on car loan repayments — as a general rule, you should try to avoid going above 15% of your monthly post-tax income.

Coming Up with a Down Payment

The more you can put up for a down payment, the less you’ll pay in the long run. Saving up now for a larger payment helps because:

  • You could get a better interest rate
  • There will be fewer total payments — or lower payments — over the length of the loan.

You’ll also own a greater share of the car, which will be a huge advantage if you ever want to sell or refinance. The point is that you shouldn’t think only in terms of monthly payment — if you can, shoot for a 20% down payment.

Working Out Your Total Costs

Before you even get to monthly auto loan repayments, work out:

  • Taxes
  • State fees
  • Dealership documentation fee

Next, calculate the rough monthly cost of owning your prospective vehicle. Remember that this doesn’t just include the monthly loan repayments — you’ll also need to account for:

  • Maintenance
  • Gas
  • Taxes
  • State registration renewal
  • Car insurance

Find Your Next Used Vehicle by Visiting a CarHop Dealership

Now that you have an idea of what you can pay, take a look at your local CarHop inventory. We offer Buy Here Pay Here financing, great limited warranty coverage,* and even a 7-Day Money-Back Guarantee.** Visit your nearest location today to find out more.

* See dealer for copy of limited warranty.
** See dealer for details.
Posted in Car Buying