How to Calculate Car Payment That Is Affordable
People that drive cars around would probably know how expensive is transportation cost. The safer case is to be able to get car upfront with a lower monthly payment whereby it will be easy for you to purchase what you can be able to afford.
It is always expected that you carry out appropriate calculation on your budget so that you can have a better insight on how much you will need to pay for the car you wish to have.
How Can You Calculate This?
It is essential that you are acquainted with how much you can afford to pay monthly before you conclude of buying a car. In order to do this, you should be able to know your monthly bills and expenses such as rents, utilities and debt payments, also some factors which include car ownership, insurance, maintenance, fuel, registration and other payments. But firstly, your first consideration should focus on your monthly bills and when done it is then you can take away what remains after the total monthly bills and take a portion from the remaining cost and now earmark it for your monthly transportation costs. That is a good way to know how much you can put for a car payment, another way to do it is through 50-30-20 rule. This rule is a well-known budgeting ratio whereby you will have to divide your take after-tax income into three places and the first 50% will go directly to necessities while the 30% will go to things you might want to purchase/buy and the remaining 20% go to savings. In this regard, 50% will go for things that are very necessary which include utilities, healthcare, foods, rent/mortgage, debt payments and other cost that are unavoidable which you will have for each month. Then, 30% is meant for things that are your desire which might include retail purchases, entertainments and other expenses that cover lifestyle. The remaining 20% is to save for rainy days. This can be allocated for a specific purpose or goal and in fact it can be placed on retirement fund or probably emergency fund. You can even decide to put it into a general savings account. In any calculation you might wish to do, be sure that all transportation costs are covered in your analysis when trying to calculate for car payment.
Conventional wisdom is all about making sure your car payment shouldn’t be more than 15% of your monthly income. This means after you have removed the necessary tax charges, your car payment which is meant to be the car loan repayment shouldn’t be more than 15%. This is done in such a way that you will be able to limit your monthly car loan and still be having money left over each month to cover other financial expenses.
Always Consider Your Total Transportation Costs
Be reminded that your car payment isn’t only your transportation costs as there are other things you will still need to pay for which include insurance, gas, petrol, maintenance, parking and other related expenses. Therefore, in your planning make sure you include all these costs together with other expenses and even emergency in case of unforeseen scenario. However, most of what we listed we depend mostly on the type of car you purchase and it is appropriate you have the rough estimate and deduct them from the total transportation costs. When you are able to do this, the remaining amount will reveal how much you can spend for car payment.
Know the Amount of Down Payment You Can Afford