Updated: Oct 8, 2021
Two of the biggest purchases Americans make in their lifetimes are their homes and cars. Although the thought of buying a new vehicle to drive around is exciting, it also comes with some due planning and assessment. After all, it’s a significant investment, and everyone wants to make the most of their new ride.
Aside from the sticker price, one has to consider additional costs of owning the car, such as maintenance and auto insurance. In some cases, a personal loan may be necessary to help finance this big purchase.
Many individuals wonder how much they should shell out when purchasing a vehicle but don’t know where to start the computations. With this, here’s a quick guide to finding out how much to spend on your new car:
1 - Consider How Much Cash You’re Willing to Shell Out
Before buying a car, it’s crucial to figure out how much cash you have on hand and how much you’re willing to spend on down payments. It’s advisable to deposit at least 20% of the vehicle’s total value, but 10% may be acceptable if you’re purchasing a used car.
Paying a down payment of at least 20% is highly beneficial in more ways than one. It will help prevent owing more than the car is worth, and reduce the money you owe. You may benefit from lower monthly payments, a shorter loan term, or both. Moreover, paying more will save you money on interest.
You may also want to consider getting pre-approved for auto insurance to know what rates you qualify for. Doing so will likely not affect your credit score unless the lender conducts a hard credit check.
2 - Research on Maintenance Costs
Maintenance is a significant expenditure in owning a car. A vehicle needs gasoline, oil changes, batteries, and many other things to operate at its best. Moreover, you’ll have to pay for repair costs if it unexpectedly breaks down.
A good measure would be to set aside around $50 per month for these expenses. However, it’s also best to consider what type of car you’re getting. While $50 may be enough to cover the monthly maintenance expenses of older vehicles, new and higher-end models will cost more. It’s advisable to look up how much others spend on the specific make and model you’re getting.
3 - Get Auto Insurance Quotes
Auto insurance is also a necessity when it comes to owning a car, as it’s an excellent way to protect yourself from the costs of accidents and other unexpected events. In most states, it’s also a legal requirement. Often, this is one of a vehicle owner’s most significant expenditures after the big purchase. Ensure that you get multiple quotes and choose the most affordable one that covers all your needs.
4 - Estimate Your Monthly Payments
After determining how much you’re willing to pay in down payments, what rates you qualify for, and how much you’ll be spending on maintenance and insurance, you can get a rough estimate of your monthly payments. Opting for a personal loan with a longer loan term will allow you to pay lower monthly payments, but the interest will be higher. Moreover, you’ll be in debt for more extended periods.
Eventually, you can find a monthly payment you can comfortably afford. However, it’s also best to keep a balance between that and a lower interest rate.
Get the Best Personal Loan for Your Next Big Purchase
Having big purchases means a significant amount of planning, so it’s best to know how much you can spend before finishing a deal. Vehicles are always substantial investments, but this guide can help you get the most of your money. Ensure that you do your research and take out a personal loan that works for you.
If you’re looking to get a personal loan in Birmingham, AL to help finance your new car, First Finance Company Birmingham has you covered. We offer a wide variety of personal loan sizes to fit your financing needs. The application process is quick and easy, and we accept applicants with a less-than-stellar credit score. Apply today!