How to Determine the Amount of Car You Can Afford

If you are thinking about making 2016 the year you buy a new car, one of the most important things you'll need to figure out is how much you're willing to spend on a new car. The key is to find a car that will not only meet all of your needs, but one that won't make you car-poor as well. If you are thinking about coming to our Springfield Toyota Service and Car Sales location, here are a few tips to help you determine how much you can afford to spend on a new car:

Make a Wish List of What You're Looking for in an Automobile

By creating a wish list, you have a good starting point to see how much you would have to spend to get a car that will meet your requirements. Are you looking for a big car, small car, or maybe a truck? Are there any special items you would want like leather interior, a sunroof, or keyless entry? Plug it all in and check dealers and manufacturer's websites to see how much all of that would cost. If it's way out of league, you can then rank which things are more important to you to get the price at a more manageable level.

Gather all of Your Expenses and Subtract Those from Your Take Home Pay

You should already have some sort of a spreadsheet that has all of your monthly expenses. If not, you should compile all of your expenses in one place, so you can create your monthly budget. Consider not only your mortgage/rent, credit card payments, and student loans, but also your food, entertainment, and other expenses (as well as savings) that you pay every month. Take that number and subtract it from your take home pay to see how much you could afford. The good thing about having an itemized list of everything you spend money on is that you can then see where your money is going and curb your behavior if you're spending money excessively.

Consider all of Your Assets

If you're financing your automobile, one of the things a lender will look at is all of your assets to ensure it will get its money back on the loan. It will usually require a down payment of 20% to show that you're a serious buyer. Your assets could include cash, stocks, and other options that you can liquidate to acquire the money for your down payment. If you're trading in a car, this is an asset as well. A trade-in of $4000 could significantly reduce the total price paid on the car, which means you'll spend much less over the lifetime of your loan. Remember that 20% is usually only the minimum. You can put down as much as you want, so if you can it might be a good idea.

Buying a new automobile is a very important financial decision. By making the best decision, you'll need to figure out how much you can afford. Consider not only the price of the car, but maintenance, gas, and other expenditures that come with ownership. For more information on finding the right car for you, please visit us on Rt.22 in Springfield, NJ.