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How Much Car Can You Afford?

It finally happened. Your old car – the one you had decided you would keep until it literally fell apart – has finally bit the dust. Or maybe you’ve decided the time is right to upgrade to an SUV to help get you through those rough winters.

No matter what your reasons, if you’ve found yourself in the market for a new or used vehicle, then one of the first steps in the process is to decide how much vehicle you can afford.

There are financial rules about how to know if you can afford many things. Rent on a place to live should be no more than one week’s paycheck. A monthly mortgage payment should be no more than 20 percent of your salary after taxes.

A similar rule applies to knowing just how much you can afford when it comes to purchasing a new or used vehicle. Financial experts have suggested that no more than 20 percent of your monthly income after taxes be spent on an auto payment. That includes factoring in the purchase price, any down payment you are able to make, and the interest rate and term of the loan.

Estimating your monthly payments, based on the purchase price, down payment and financing options, also is important. If interest rates are low, it allows for buyers to get more for their money. However, if you have less than stellar credit, it will affect the kind of interest rate you receive on any loan. If you are subject to a higher interest rate, it would be wise to seek out a less-expensive vehicle to offset the larger interest amount you’ll be paying.

One of the best ways to lower your monthly payment and get a lower interest rate is to put a significant chunk of money down on the vehicle you wish to purchase. If it is in your budget, try to put down at least 10 percent of the vehicle’s purchase price in the form of a down payment. The higher the down payment is, the lower the monthly payment will be, which can increase your ability to pay off the loan sooner.

Another very important factor to consider is the maintenance costs for the vehicle you will be purchasing. Most brand new vehicles come equipped with three year or 36,000 mile warranties at a minimum. A few car dealers will offer warranties on the power train that can extend to 60,000 miles or more. These warranties only cover the cost of repair work, and not the annual maintenance that is a part of owning a vehicle. Annual maintenance items include oil changes, tire rotations, replacing tires and flushing/filling various fluids in your vehicle. The average vehicle owner spends 1.5 percent of their annual income on vehicle maintenance each year. Be sure to factor that in when determining if a particular model is affordable for you.

Last but not least are the costs to fuel and insure your vehicle. With gas prices currently at $4 or more a gallon in the U.S., many consumers are purchasing smaller, more fuel-efficient vehicles. According to information collected by AAA, the average cost of fueling a small sedan annually is $6,735. SUVs and large sedans were the least fuel efficient, costing between $8,000 and $11,000 annually to fuel.

Vehicle insurance also is an important factor in the affordability of any vehicle. Newer models always cost more to insure than used vehicles. Insurance rates also will depend on the number of miles you anticipate driving annually, and whether you drive in a high-risk area for automobile accidents.

Once you have factored in all of these items, you will have a decent idea of just how much car you can afford.

Regulator Blasts Wells Fargo for Deceptive Auto Insurance Program

... Wells Fargo for forcing hundreds of thousands of borrowers to buy unneeded auto insurance when they took out a car loan, as well as its handling of the problems once they were detected. The regulators' report, sent to the bank this week, is preliminary.

Published:  Fri, 20 Oct 2017 06:31:00 GMT



Cover: In Oklahoma, where one in eight adults turns to payday loans, are alternative financial services the best deal for Oklahomans

"signature" loans, pawnshops, auto title loans and rent-to-own products. Marketed as being helpful for financial emergencies, the quick cash granted to credit- and cash-strapped borrowers too often leaves Oklahomans with ruined credit, unmanageable ...

Published:  Fri, 20 Oct 2017 06:28:00 GMT



BRIEF-Guangzhou Automobile's unit plans financing, JV with Honda to start AC model project

Says board approves car financing JV to issue up to 4.0 billion yuan ($604.32 million) car mortgage asset-backed securities * Says board approves JV with Honda to start AC model production project worth 383.5 mln yuan * Says board approves unit to invest ...

Published:  Fri, 20 Oct 2017 03:56:00 GMT



Egypt Car Finance Market Outlook 2017-2021

The "Egypt Car Finance Market Outlook to 2021 - Stringent to Introduce Innovative Measures to Determine the Credit Worthiness" report has been added to Research and Markets' offering. The report covers market size on the basis of credit disbursed, number ...

Published:  Thu, 19 Oct 2017 09:00:00 GMT



Nvidia Teaches the World About Deep Learning in Finance

"We set out to develop labs that would show how to marry the basic building blocks like auto-encoders, recurrent neural networks, reinforcement learning, with very relevant finance problems like algorithmic trading, statistical arbitrage, optimising trade ...

Published:  Fri, 20 Oct 2017 04:55:00 GMT



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