So, you've made the decision to buy a used car, and it's one big decision indeed. More people today are opting to buy used cars instead of new cars for many reasons, one being the fact that it's less expensive. Used cars today are also quite good when it comes to performance, and you can buy a used car of almost any make and model you like. But when you have made that decision and are preparing for the next step, it would be wise for you to make sure that you can afford it and will not end up digging too deep into your pockets for your dream car. If you want to be sure that you are making the right budget decision, here's how you can properly determine your budget if you want to buy a used car.
• The total cost
The total price of the vehicle you choose is going to be more than just the 'sticker price' of the vehicle - it also includes other costs such as registration and title fees, sales tax, and other things such as an extended warranty. Make sure to think of the total cost in these terms and leave room in your budget for unexpected extra expenses as well. All those little expenses can add up, and you also have to think about auto insurance, regular car maintenance costs, gas, registration, repairs, and some other expenses related to owning a vehicle.
• The car's down payment
You also have to come up with the down payment for the vehicle. If your down payment is higher, then it follows that you will have a lower monthly bill.
• The payments per month
If you are going for financing, then you need to think about the monthly payments. Your payment each month will include not only the principal but also the interest. Some factors which will affect the cost of your monthly payments also include the term of the loan, the interest rate, and the actual down payment. Here's a tip: if you'd like to save a bit more, you can always wait to make your purchase when the interest rates aren't as high; but if you need a car now, then it's best to consider all these factors.
• What to do with your old car
If you have an older car, here's one option for you if you'd like to make sure you can save (and perhaps even earn) money - trade it in against the new car. If you trade in your old car, you can reduce your new used car's total cost, and you can also help improve the terms of your loan.
• Remember the rule
There's also a specific rule when it comes to buying used cars: the 10 to 20 percent rule, which we highly recommend as a premier supplier of used cars in Utah. This applies if you'd like to save even further with your purchase - you should devote around 10 percent of your monthly income or salary to funding for your car. This means that if you make a total of $3000 a month, then you should allot only 10 percent of it ($300) for your monthly car payments.More than this and you may find it more difficult to budget for your other expenses. At the most, expect to spend around 20 percent of your income per month on your vehicle, and this already includes the monthly payment plus other expenses such as gas, insurance, and so on.
On the other hand, if you aren't planning to go for financing, you should still follow the 10 to 20 percent rule. You want to use 20 percent of your income per year in order to pay for your vehicle. So, for instance, if you earn an income of around $36000 annually, then you can spend about $7200 per year on your car. Good luck, and happy choosing!
