Buying Your Next Set of Wheels

Monday, July 07 at 11:20 AM
Category: Personal Finance

Buying a car is like jumping into a lake. Without some planning and research into what you might encounter, you could be in too deep before you know it. But if you take the car buying process one step at a time and put some time into researching your purchase and your finances before you stop at the lot, the process is likely to go a lot more smoothly.

What Can You Afford?
Before you begin shopping for a car, it's important to take a look at your budget and figure out how much you can afford to spend on a vehicle, without strapping yourself or cutting into your savings. If you don't have a budget, read up about creating one. Can you afford $200 a month for your new vehicle? What about $300? That number will be the total amount you can pay for the car itself and operating expenses, like gas and maintenance.

Operating expenses can be about one third to one half of the monthly cost of a new car. So take the amount you've decided you can spend on your car each month and multiply it by 0.66. That is the most you should consider spending on monthly payments for the vehicle to be able to afford operating expenses as well.

The Down Payment
You're also going to need a big chunk of change for a down payment. How much? The bigger the better. To get a loan for a car, and often for a lease, you'll probably need to make a down payment of around 10 percent of the total price of the vehicle. The larger your down payment, the smaller your monthly payment will be and the less you will pay in total for the car in the long run. But make sure you don't cripple yourself or deplete your savings account with too large a down payment. Find a comfortable balance. There are calculators to help you anticipate your auto loan payment or determine how much car you can afford.

Conclusion
Once you’ve researched what you can afford, how much you can offer for a down payment and where you can get financing, you won’t feel like you’re drowning in the car buying process. Head on over to the dealer and look for a car that fits your plan!

Looking for car buying tips? Check out our Pinterest board, Tips for Buying Your Next Set of Wheels.*

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Blog updated 9/25/14.

Tags: Debt, Lending and Financing
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