How much car can I afford?
1 before visiting a showroom or browsing the internet.
But easy to answer?
Not so much especially with theaverage price of a carat $38,000 according to Kelley Blue Book.
Rule-of-thumb advice on how much car you might afford is everywhere.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
She jokes about saying it depends after each car-buying question she fields but its an answer she sticks by.
It depends on what your personal financial situation is like.
Whats Driving My Car Decision?
Is it time to replace your beater with another car you’re able to drive into the ground?
Do you need something more reliable for the cold-weather climate youve just moved to?
Or do you want to buy something more fuel-efficient?
And dont forget to consider the future, says Hausknost.
How has your life changed and is it expected to stay that way in the foreseeable future?
The pandemics shift to work-from-home might shift your car-payment priorities, for instance.
A growing family or looming retirement are typical considerations.
But enough with the boring practicalities.
What if you just love that new-car smell and want a change?
Thats OK, just see to it you move on to the next questions.
If the math works out, go for it!
Do I Have a Handle on My Cash Flow?
Know what youve got coming in (earnings) andwhats going out(spending).
Hopefully youll have money left over for a new car.
What Can I Bring to the Negotiation Table?
If you have cash on hand, know how much youre ready to part with.
Do you have enough to pay cash up front for a decent used car?
Would you rather make a sizable down payment on a new vehicle?
Remember that cash up front can help you negotiate a discount, says Boudreaux.
How Much Debt Can I Handle?
Those rules of thumb we mentioned?
If youre thinking of a car loan, theyre a place to start.
At the end of the day everyones situation is different.
Are those guidelines a stretch for you, or can you stretch the guidelines?
Boudreaux picked up this tip watching his father sell cars: Dont think only about your monthly car payment.
His advice is to negotiate price first and negotiate the terms second.
If your car debt is keeping you up at night, its probably time to recalculate.
What are the Hidden Car Costs?
What new or increased expenses will come with your new car?
Thats on DiDonatos hit parade of car-purchase questions.
And dont get surprised by add-ons at purchase time.
Heres what to get a handle on:
6.
Have I Considered Alternatives to a Brand New Car?
The more flexible you are about your car choices, the more likely youll hit your spending target.
The hardest thing is not to become emotionally attached to one car, says Boudreaux.
Youll save money if youre willing to consider options such as used and leased vehicles.
Along with your answers to Question #1, advisors offer these considerations.
If shopping for a leased car:
If shopping for a used car:
7.
Final Check: Am I Being Realistic?
Some analysis needs to be done in most scenarios, he says.
How much car you’re able to afford cant just be a fly-by-night decision.
Talking things over with a trusted friend, family member, or financial advisor can be helpful.
Will these goals be hindered by your monthly car payment?
And verify you have a clear picture of your job security and your spending habits.
A new car is a very emotional decision, says Hausknost.
Let your head and not your heart guide you!
She is a contributor to The Penny Hoarder.
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