How Much Car Should You Try To Afford?

You've been bitten by the new car bug. Or perhaps you're just so tired of
your current car; you can hardly stand to drive it anymore.

You're about to embark on the research phase of the car buying experience
(which is the right course of action). But, before you even begin pointing,
clicking, and eyeballing these shiny new toys; take a step back and
determine just how much car you can afford to own and operate.

The conventional wisdom is not more than 20% of your monthly income. your
net (take home) pay. not your gross pay. And by the way, while you're doing
your figuring on this 20% monthly cash outlay; make sure you include all the
cars you own.

Regardless of whether you don't even pay rent or own your home outright,
stand firm on the 20% rule.

On your way to calculating your 20% budget, in addition to the purchase
price, be sure to factor in any down payment and/or your trade-in value. The
bottom line you'll finance is the bottom line.

Of course, the more money you put down the more car you can buy and still be
under the 20% rule. Keep in mind, the more money you put down doesn't affect
how much you actually pay and cars are severely depreciating assets. not
investments.

Once you get close to determining your 20% number, you'll need to know the
going interest rates you'll be paying on your borrowed money. And since
we've now broached borrowing money and interest rates. you should also plan
on getting a copy of your credit report while you're at it.

Another important aspect to consider is the costs of ownership involved with
the car. Things such as fuel, maintenance, and insurance premiums can run up
some hefty numbers on you in addition to your monthly payment.

Maintenance and insurance costs are somewhat related, because insurance
companies take into account the cost to repair a vehicle as part of their
premium calculation. So, if you are looking at a car that is expensive or
difficult to repair, you're probably also looking at higher insurance
premiums as well.

So, even though you should keep the 20% rule firmly in mind as your are
crunching your numbers, don't overlook all the other monthly expenses
associated with the car you are considering.

Taking the time to get all of your financial and budget numbers in place
before you seriously begin looking at your intended makes and models will
serve as a good financial rudder for you during the car buying process and
make for much wiser purchase.

About The Author: Jeff Neilan's car dealer experience offers insightful
http://www.acarbuyersguide.com that save you time and money. Be sure to
visit www.acarbuyersguide.com for car financing tips, ownership costs, &
more.