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A car is one of the "big" purchases you will make. Before you get your heart set on a specific model, you need to know what you can afford.
Often when people go shopping for a car, they begin by looking at dealer or manufacturer Web sites to see what type they'd like to buy. Before that step, though, shoppers should figure out what their needs are, how much they can afford to spend, and decide whether they should buy or lease or choose a used car instead of a new one. This chapter will help you make those decisions.
Begin with a budget
It's surprising. Most people have only a vague idea of what they can afford when it comes to getting a new or used car. Some people think in terms of the basic cash price, while others think only of what the monthly payment will be.
Both approaches have flaws.
There's more to buying a vehicle than the initial cost, even if you pay cash. There are insurance, fuel costs and maintenance. Almost any new vehicle -- whether it's fresh from the showroom or new to you -- will mean higher insurance rates. Maintenance on a used car, even one just three years old, may be required sooner than you think. And going from that small sedan in your driveway to a flashy new SUV will mean shelling out more per month at the gas station.
Setting out to buy a car with just a ballpark monthly payment in mind -- whether leasing or straight financing -- is a surefire way to pay more than you might otherwise.
Determine your budget
So sit down and look at all your household expenses, as well as cash on hand and your take-home pay and determine what you can reasonably afford to pay for a new car. If you've never done it before, take this opportunity to build a household budget. If you connect to this Bankrate story on family budgeting, you will find a downloadable interactive spreadsheet you can use to build your own budget.
Need a general rule of thumb? If you're devoting more than 15 to 20 percent of your household income to transportation, you should probably scale back.
Often when people go shopping for a car, they begin by looking at dealer or manufacturer Web sites to see what type they'd like to buy. Before that step, though, shoppers should figure out what their needs are, how much they can afford to spend, and decide whether they should buy or lease or choose a used car instead of a new one. This chapter will help you make those decisions.
Begin with a budget
It's surprising. Most people have only a vague idea of what they can afford when it comes to getting a new or used car. Some people think in terms of the basic cash price, while others think only of what the monthly payment will be.
Both approaches have flaws.
There's more to buying a vehicle than the initial cost, even if you pay cash. There are insurance, fuel costs and maintenance. Almost any new vehicle -- whether it's fresh from the showroom or new to you -- will mean higher insurance rates. Maintenance on a used car, even one just three years old, may be required sooner than you think. And going from that small sedan in your driveway to a flashy new SUV will mean shelling out more per month at the gas station.
Setting out to buy a car with just a ballpark monthly payment in mind -- whether leasing or straight financing -- is a surefire way to pay more than you might otherwise.
Determine your budget
So sit down and look at all your household expenses, as well as cash on hand and your take-home pay and determine what you can reasonably afford to pay for a new car. If you've never done it before, take this opportunity to build a household budget. If you connect to this Bankrate story on family budgeting, you will find a downloadable interactive spreadsheet you can use to build your own budget.
Need a general rule of thumb? If you're devoting more than 15 to 20 percent of your household income to transportation, you should probably scale back.
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