Buying Your First Car

Whether you’re looking to buy your first car, or it’s time to get rid of the old and get on with the new, there are several financial implications to consider. Here are some steps to take to help you plan for a car purchase:

Calculate what you can afford

Avoid negotiating a monthly payment and instead look at these numbers to figure out how much you can spend –

20% down payment

This might include a combination of cash and a trade-in. Putting 20% down will keep you from owing more than a car is worth due to depreciation.

4-year loan

To keep interest costs low, try to finance the car for 48 months or less. This will save you considerable money in the long-run over a 60, 72 or 84-month loan.

8% of gross income

Keep your total monthly car payment at or under 8% of your gross monthly income (before taxes).

Consider the total cost of ownership

Your monthly payment isn’t the only expense to factor in –

Insurance

Rates vary depending on your age, driving record and even the vehicle’s make and model. You can get quotes before committing to a car purchase.

Fuel & Maintenance

Gas mileage can make a big impact on your total monthly cost, and maintenance varies by vehicle. Look at the recommended maintenance schedule, and the cost of things like oil and new tires.

Taxes, Title & Tags

State and local registration and sales tax will be added to the total cost at the dealership, and other annual taxes and fees may need written into your budget.

Shop for Financing

You don’t have to take the offer presented to you at the dealership. Get preapproved for an auto loan at your local branch so you’ll have an idea of what you can afford before you start shopping.