When Is A Car Payment Too High?
A car is one of the most expensive purchases you can make. Many people turn to auto loans to finance their car purchases. Cars can be an emotional purchase for some, and it’s easy to ignore the affordability and your budget when driving a new car. However, you can run into some trouble after you sign if you ignore these payment troubles. Here are some important points to consider when getting into car payments.
So, When Is a Car Payment Too High?
According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn’t your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income. This will ensure you have enough cash in hand to make payments for other loans, utility bills, and household expenses.
How to Avoid High Car Payments?
To avoid high car payments, analyze your financial situation and figure out how much money you can set aside for a car. There are several online car purchase calculators that can tell you what payments are too expensive for your situation. All you have to do is enter a few pieces of information and the calculator tells you what you can afford. The salespeople at the car dealership do not focus on the total price of the car. All they tell you is the monthly installments and the loan tenure. You should focus on the price of the car to figure out if you can afford it. Cars are expensive, most of them costing $20,000 or more. If you are looking to purchase an SUV or MPV, that’s an even higher cost. Remember, the price of the car is an important factor that decides your car payment. If the car is expensive, the car payment will be high.
The next step to avoid high car payments is paying as much as you can afford on the down payment. This will reduce the loan amount, and the car payments will be lower. Here are some more tips to avoid high car payments.
- Research different financing options. Don’t rely on car dealership financing alone. Approach banks, loan offering institutions, and other lenders to check their offers. Look for lower interest rates when shopping for an auto loan.
- Don’t buy extras when purchasing the car. It increases the car price. Only select features and accessories you need. Some of the extras offered by a salesperson at a car dealership are paint protectant, fabric protection, rust proofing and others. Determine whether you really need these things before giving in to the pressure from the salesperson.
- Never pay the sticker price for the new car. Negotiate with the dealer to lower the price.
For most people, your car loan isn’t your only debt. Never miss your other payments in favor of your car payments. High car payments put unnecessary stress on your financial budget, but you can avoid this by proper financial planning.
Pricing includes all offers and incentives. Tax, title and tags not included in vehicle prices shown and must be paid by the purchaser. $669.27 admin fee is included in the price. Price does not include dealer installed options.While great effort is made to ensure the accuracy of the information on this site, errors do occur so please verify information with a customer service rep. Mention this advertisement to the dealer to receive the advertised price.