What You Need to Know Before Purchasing a Car
Buying a new car can be exciting. A new car is an upgrade from the old car. The challenge is in knowing which car you can afford. Most people are in this category which leads to late car payments. Late payments can make you get listed on credit reports for a lot of years. Below is what you need to know to choose a car you can afford.
It is essential you look at your finances. Your credit score and financial situation play an important role in knowing the car you afford. You need to consider your income. The car payments should not be more than 10% of what you earn. You should look at your net pay and not gross pay. It can be hard to determine your income if you are a freelancer because it can be challenging to predict your income. However, you can still manage to ensure your finances are stable. Calculate averagely what you earned over the past year after tax to know what you can afford.
Also, put into consideration the total amount you need to own the car. You will have to pay for gas, insurance, maintenance and warranty packages. The total cost should not be more than 20% of your take-home pay. You can know this by calculating insurance, mileage and how much you will be driving the car. You should not choose a car that consumes a lot of fuel if you cannot afford.
Take a look at your obligations financially. Calculate your expenses and take-home pay. Financial obligations such as mortgages and student loans can take a huge amount of your pay check. This means you are left with less money to spend on a car. Knowing your financial obligation will help know what you can do without.
Your financial picture will also be determined by your credit score. It determines whether you will get approved for financing or not. It also has an impact on interest rates. Your credit score needs to be high for more financial options.
Your finances and credit score will give you an idea of which car you can afford. You also need to money that is saved up for a down payment. A car comes with additional fees. Down payment covers fees like state taxes, title, registration fees and dealership fees. Add the costs to get a better sense of how much the car is worth.
It is important you shop around for auto loan. There are many dealers who provide financing. Dealers are usually willing to work on pricing if you get preapproved for an auto loan. You can investigate online when shopping for a car. You will get to view options of both new and used cars. Your financial picture will help you make your decision easier. Make sure you choose a car that is affordable.