How to Budget for a New Car

How to Budget for a New Car

How to Budget for a New Car

Honda Dealer Near Me

In the excitement of shopping for a new car, many people forget the importance of budgeting. Before you hit the dealership, you should take a moment to decide what monthly car payment you can afford. It would help if you always had a payment plan that you are comfortable with so you don’t get overwhelmed. It’s advised that you spend less than 10% of your monthly take-home pay on your car to keep your total car costs below 15% to 20% of your income. If you want to learn more tips on how to afford a new car, keep reading.

Know Your Budget

It is recommended to use the 50-30-20 rule, dividing your take-home pay into three general spending categories, 50% for needs, 30% for wants, and 20% for savings. For example, the monthly payment for your auto loan falls into the “needs” category. A car is a lifeline for many people, connecting them to essential tasks such as holding a job or transporting the kids to school.

Check Your Credit Score

Knowing your credit score can be helpful as well. Having a good idea of your credit report and credit score and the interest rates available can help you negotiate a good deal and save hundreds, if not thousands, of dollars.

Understand that Your Payment Isn’t Your Only Car Expense

Don’t forget that on top of your car payment, there are extra auto-related expenses. This includes insurance, gas, repairs and maintenance, parking, and tolls. Many financial experts recommend keeping total car costs below 15% to 20% of your take-home pay. So while your car payment is 10% of your take-home pay, you should plan on spending another 5% on car expenses. For example, if your monthly paycheck is $3,000, your car payment would be about $300, and you’d plan on spending another $150 on automotive expenses.

How Much Should My Car Down Payment Be?

In general, you should strive to make a down payment of at least 20% of a new car’s purchase price. For used vehicles, try for at least 10% down. These down payment amounts can include cash, the value of a trade-in, or both. If you can’t afford the recommended amount, put down as much as possible without draining your savings or emergency funds. The more you can put down when buying a car, the better your financial position will be when you drive away. Generally speaking, the more you put down, the lower your interest rate. Making a substantial down payment and financing less of the purchase price signals to lenders you are a lower-risk borrower.

Know Your Trade-In Value

If you have a trade-in, you can easily find its value on the CMA Honda’s website under our “Trade-in-Value” tab. This feature lets you know the value ahead of time, so you know if you’re receiving a good offer. Or try our Kelley Blue Book Instant Cash Offer feature. With this, you will be given a guaranteed price for a trade.

Honda Financing Near Me

At CMA’s Honda of Winchester, we offer competitive financing rates and terms on all our new trucks, cars, and SUVs. Our finance experts will help guide you through the financing process and help you get into your new vehicle. At CMA’s Honda of Winchester, we take a straightforward approach to the car shopping process and deliver exceptional customer service and quality products at a fair price. Contact CMA’s Honda of Winchester’s finance team today, or if you’re ready to start the financing process, you can fill out our secure finance application online.

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