Financial experts follow a basic formula to help drivers create a budget for a new car. You should normally never spend more than 10 percent of your income on a monthly lease payment. Of course, if you don’t have a lot of debt that you pay down or non-essential expenses in areas that represent the things you want versus the things you need, then you can budget for a higher amount. Whatever your situation, always consider the following when calculating your budget for a new car:
Think About Design-Related Costs
Some vehicles cost more than others based on their overall design. Some have higher post-purchase expenses attached to them related to insurance and repairs because of their model type, parts availability and repair difficulty level. For example, you can usually expect to pay more for a luxury or foreign-made vehicle. That said, you can also expect to pay more based on the vehicle’s function. A pickup truck built to haul large loads and drive over rough terrain normally costs more than a medium-sized or smaller four-door, non-luxury sedan.
Confirm All Amount Factors
Dealers and financial institutions can usually provide you with an estimate that takes into account lease factors that impact the monthly payment. For example, total loan amount and term length, type and amount of interest and paperwork or administrative fees affect total cost. Keep in mind that you can also experience costs higher than any estimate or base price because of added extras that the dealer or sales rep convinces you to add on at the time of purchase. For example, you might add detailing, mud flaps, or light-related accessories.
Don’t Forget Auto Insurance
A car accident can happen at any time. Pedestrians and animals sometimes run out in front of moving vehicles. Drivers crash because of manmade and natural events. Insurance coverage is a state requirement to protect drivers, their passengers, and others. With a new car, collision and comprehensive insurance normally costs more because of the vehicle’s higher value. A trusted insurance firm like The Lofrumento Agency, Inc. can provide you with an insurance estimate. Insurers consider a variety of factors when calculating the cost of premiums, including your age, driving history, geographic location, vehicle model, and overall risk.
Remember the Everyday Expenses
You must pay a new vehicle state registration fee. If your commute involves toll roads or bridges, you pay for parking anywhere or your job requires that your vehicle has a pristine appearance, then you need to budget for these expenses. Additional expenses include gas, if you own a gas-powered or hybrid vehicle, and maintenance expenses for parts that often need replacement, such as fluids, burnt out lights, fuses, batteries, and windshield wipers. Always budget approximately five percent of your income after taxes for these extras.
Local dealers and financial institutions can provide you with more information about budgeting a new car. It’s especially important to seek their guidance during your budget planning phase as they can help you to gain a better idea of total and monthly payment cost differences in your community. You can find a car that fits your wants and needs at an affordable price that doesn’t break the bank or leave you financially in hole. You merely need to be honest with yourself about the true costs related to buying and owning a new car and create your budget before you shop.