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.
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:
When most people buy a car, they tend to only consider the monthly car payments.
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.
These helpful car buying tips are courtesy from our friends at GreenPath Financial Wellness.