Which Car Can You Afford? | Car Finance
- Car Finance,
- Sep 09, 2019
You have recently got a job that pays well and since the money is in your hand, you want to spend it somewhere but don’t know where you want to. You already have a nice house, but you always travel to your job on public transport. For a moment, some other necessities come to your mind but eventually, you think clearly and end up deciding that you want to save up enough money to buy your very own car. You may think, how much do I actually need to spend on a car? Well, to answer that, we must say, “That’s all up to you.” It all depends on your taste, your choice, and your usage that determines how much you want to save for a car.
We can help you identify which car you can afford based on your gross annual income, however. It’s quite an easy task and really simple to understand. So, let’s get going.
Know how much you can spare:
The first and foremost thing you can do is calculate your earnings and deduct the taxes, expenditures, necessary budget cuts or anything that might reduce your earnings and is absolutely necessary for your living. This would give you the amount of money you can spare.
For example, suppose I earn $2000 in a month, about $800 of it is paid off in one way or another. $1200 is the amount I’m left with and I can do whatever I want to do with it (considering I have low expenses and a simple, non-luxurious lifestyle). Now I can either save up that $1200 for some fancy new thing or spend it off as soon as I get to enjoy life to its fullest. Since I know that I have $1200, I can make decisions on how to use it.
Suppose I’m saving up some money to keep for emergencies and I need to reach at least $20000 in that line. Now I can save either the $1200 completely each month, or save a part of it and use the other for something else. So on and so on, you get the idea of how you can calculate the spare money which would not be a very large amount but can eventually become one.
If you know how much you can spare for your car, you can make the right decision on it. If you can save up to about $500 a month, you can eventually cluster up enough money in about a year to buy a good quality, general-purpose used car. Of course, you cannot dream of getting a Maserati or a Tesla with that budget, but it’s a start, and hey, who knows if you could one day save up enough money to get even one of those high-end luxury cars!
Decide on which type of car you want:
Deciding about your car beforehand can really help you save up the money for it. If you want a luxury car, you would certainly need to save up a lot more and wait for a greater time as compared to if you want a simple, lovely Honda Civic. Civics are much cheaper and do get the jobs done and if you still want to get a step lower than that, you can go for used cars which cost anywhere for about 4000$ to 15000$ considering what type and in what quality you want the car to be.
See if you still have extra money excluding the one for car:
This is a really important step that can help you in the long run after you buy a car. You should always have some extra money left for emergencies or vehicular tune-ups that you might be interested in. Always keep some extra money in hand just in case you run into a surprising encounter.
If you do not have enough money, can car finance or a car loan help you?
There are a number of car finances and loans out there to help you. You can read about that in detail here.
If you are considering a loan or finance, always make sure that you have enough money or a steady income to pay it all back slowly. It should never put an even greater financial strain on you. Also, know that car loans or car finances should never ever be taken with your house or something else which is much more precious than your car as a security. These types of risk get you in a lot of trouble than you might be prepared for, so it is always a good practice to avoid them overall.
There are several strategies out there that can help you in knowing whether or not you can afford a car. One such strategy suggests that you should never pay for your car more than 25% of your gross annual income. It means that if you earn $40000 annually, you should never spend more than $10000 in your car. If that seems a bit excessive, you can always come down to the strategy which is a good one, and a widely accepted one, where you should always keep the car and loan budget less than 10-15% of your annual income. That is about $4000 - $6000 provided your annual income is $40000. You can always google the percentages, or calculate them by yourself and decide on which figure you want to settle on.
Can you afford it?
So, can you afford the car you want? Make sure that you have read and understood all of the things mentioned above before you make a decision of whether or not you can afford it. Understand that the cost should never put a heavy strain on your financial situation and there is enough money kept for emergencies or as retirement savings (hey, everyone likes saving up for their children and other stuff).
Whatever you do, that is up to you. But be sure that you stay on the safe side by running your background checks and car history checks on the vehicle you buy and if you want to do it easily and conveniently with a mere click of a button, QuickREVs is the best option for you!