New Cars – Wise ways to stick to your budget

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The bottom line for determining what you can afford for a new car is your available cash – a question of savings – and, if you finance, how much debt you can afford.

You should already have a household budget that tells you how much of your income is available for a car loan. If not, figure your auto allowance by subtracting your monthly expenses from your monthly income. Your car payment can come from what’s left over after regular expenses and obligation like rent or mortgage, utilities, and groceries.

Next, find out how much the car you’d like to buy will actually cost. Include all car-related expenses like fuel, insurance, maintenance, tags, and taxes.

If you have a computer, you can go online for help in figuring out your car budget. Intellichoice at www.intellichoice.com has a page of calculators, one of which figures “What car can I afford?”

A simple rule of thumb is the “20 percent rule.” It says you should spend no more than 20 percent of your monthly take home income on automobile expenses. By setting a limit like this, you won’t be tempted to buy more than you can afford. It also will help you be a more cost-conscious car owner.

Beware of devious ways dealers attempt to make cars more affordable.

* Low-cost leases. You may have lower payments, but when the lease ends, you own nothing.

* Loans that will outlive the car.

* Financing that ends with you owing more on the car than the car is worth.

Finally, what you can afford depends on your skill at negotiating the purchase. The lower your final price, the more money in your pocket. So stay on the target you’ve come up with, and negotiate for the price you want.



All the best,



Timben