Are you wondering how much you should pay for a new car? No article can tell you how much you can afford but there are a few things to keep in mind before you buy your next car.
Keep Total Transportation Expenses Below 25% of Your Take-Home Pay
A rule of thumb is that your total transportation expenses should not exceed 20%-25% of your monthly net income. For example, for someone making $2,500 per month (after taxes), that equates to about $625 per month for total transportation expenses. Broken down, that could look like:
Look at More Than The Sticker Price
Besides the sticker price, here are some other items to consider when making a car expense budget:
Add all of the monthly costs and then you will see your total transportation costs. And remember, just because the dealer may offer you a lower monthly payment doesn’t mean that it’s a better deal. Your payment may be lower because they offered you a loan with a longer term. These loans can have even higher interest rates so you’ll pay a lot more in the long run.
If you would like to discuss your auto buying plans with someone, you can take advantage of the GreenPath program, a free financial education and counseling program available to REGIONAL members. GreenPath counselors are available Monday through Thursday 8 a.m. to 10 p.m. (EST), Friday 8 a.m. to 7 p.m. and Saturday from 9 a.m. to 6 p.m. Call 1-800-550-1961 or visit greenpath.com today.