Buying a car is a big financial step. If done incorrectly, it can lead to crippling debt and car repossession — but buying a car doesn’t have to be a terrifying experience. If you make a realistic budget and stick to it, buying a car will be one of your greatest investments.
Make a Budget
Even if you’re an accountant in West Valley City, Utah, making a budget is going to involve some time and math skills — but it’s worth it. The first step is determining what your income and expenses are. Refer to your monthly household budget if you have one, and if not, start by making one.
If you already have a reliable car such as a Ford Focus in your garage in Utah, see how much your car is costing you each month. This is a good starting point to determining how much you can afford in car expenses. A good rule of thumb is to not spend more than 20 percent of your monthly income on car payments.
Remember the Difference Between Want and Afford
There’s a difference between how much you can afford to spend and how much you want to spend. Just because you can spend 20 percent of your income on car payments doesn’t mean you should. Decide how much you want to be spending each month, and pick a car that fits within that limit.
That same Utah-based accountant would also remind you that it’s never a good idea to pick a car you want and then try to rearrange your budget in order to pay for it.
The best way to finance a car is to set aside money each month and save until you have enough to purchase that new Ford Focus you’ve been eyeing. However, this isn’t always possible. If you can’t pay for your Ford Focus all at once, you could be eligible to apply for an auto loan. If you are financing your vehicle, plan for as large of a down payment as possible. This will save you money on interest, and mean fewer payments overall.