Determining How Much You Can Afford
Before financing or leasing a vehicle, make sure you have enough income to cover your current monthly living expenses. Then, finance new purchases only when you can afford to take on a new monthly payment. The “Monthly Spending Plan” is a tool to help determine an affordable payment for you.
Before financing or leasing a vehicle, make sure you have enough income to cover your current monthly living expenses. Then, finance new purchases only when you can afford to take on a new monthly payment. The “Monthly Spending Plan” is a tool to help determine an affordable payment for you.
The only time to consider taking on additional debt is when you’re spending less each month than you take home. The additional debt load should not cut into the amount you’ve committed to saving for emergencies and other top prioritiesor life goals. Saving money for a down payment or trading in a vehicle can reduce the amount you need to finance. In some cases, your trade-in vehicle will take care of the down payment on your vehicle.
have left after taxes and other deductions have been made.you’ve made to expenses and credit obligations. Be sure to adjust any expenses, like vehicle maintenance and
insurance expenses, which might go up or down when you get a new vehicle.
have left after taxes and other deductions have been made.you’ve made to expenses and credit obligations. Be sure to adjust any expenses, like vehicle maintenance and
insurance expenses, which might go up or down when you get a new vehicle.
Monthly Spending Plan
1.Complete Column 1 based on your current situation. Start with your monthly take-home pay. This is the amount you have left after taxes and other deductions have been made.
Subtract the amount you need for savings, monthly expenses and monthly creditor payments.
The remaining balance is the maximum amount you can afford to put toward the monthly payment for a vehicle and any new related expenses, like car insurance.
2.Complete Column 2 based on your new situation. This column will show your new vehicle payment and adjustments you’ve made to expenses and credit obligations. Be sure to adjust any expenses, like vehicle maintenance and insurance expenses, which might go up or down when you get a new vehicle.
The remaining balance in Column 2 will indicate whether you can afford the new vehicle payment and change in expenses projected.
Shop for the Best Deal When Financing a Vehicle
Take the time to know and understand all of the terms, conditions and costs to finance a vehicle before you sign the contract. Review and compare the financing terms offered by more than one creditor.
Sample Comparison
This example will help you compare the difference in the monthly payment amount and the total payment amount for a 3-year and a 5-year credit transaction. Generally, longer terms mean lower monthly payments and higher finance charges. Make sure you have enough income available to make the monthly payment by reviewing your monthly spending plan. You’ll also need to factor in the cost of automobile insurance, which may vary depending upon the type of vehicle.
