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      July 21, 2019

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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.

Wells Fargo discriminated against Dreamer by denying auto loan, lawsuit claims

Like countless other newlyweds arriving in the suburbs, the couple quickly realized they'd need a second car to get them to work and fit the children they hope to raise. Last fall, Pena, a tax manager ...

Published:  Fri, 19 Jul 2019 14:05:49 GMT



What Kind Of Share Price Volatility Should You Expect For Axis Auto Finance Inc. (CVE:AXIS)?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card! If you're interested in Axis Auto Finance Inc. (CVE:AXIS), then you ...

Published:  Tue, 16 Jul 2019 13:09:00 GMT



Lawsuit alleges Wells Fargo denies auto loans to DACA recipients

An Illinois man who says he was denied an auto loan from Wells Fargo because he is in the country under the Deferred Action for Childhood Arrivals (DACA) program has filed a proposed class action ...

Published:  Wed, 17 Jul 2019 14:30:00 GMT



I treated my girlfriend to a vacation for paying off her car loan - how do I convince her to pay off her student debt?

I work in finance and, even before working in the field, I had a strong interest in personal finance. I carry no debt and, while I know it can't stay that way forever, I'm doing my best to maintain ...

Published:  Wed, 17 Jul 2019 13:17:00 GMT



Ally Financial +4.3% as Q2 shows retail deposit, auto finance growth

Ally Financial (NYSE:ALLY) rises 4.3% after Q2 adjusted EPS of 97 cents beat the average analyst estimate of 89 cents and increased from 80 cents in Q1 and 83 cents in the year-ago period. ...

Published:  Thu, 18 Jul 2019 07:23:00 GMT



Alleged auto loan fraudster McKibbin back in Michigan

William McKibbin - the man accused of multi-million dollar auto loan fraud who recently turned up in Stowe - has returned to Michigan, where the Michigan attorney general has taken measures to ...

Published:  Tue, 16 Jul 2019 12:33:00 GMT



Car loans mean banks don't need high interest rates to rake in cash

Ally Financial was the latest bank to declare a major profit windfall in its second quarter earnings report, as the U.S. banking industry's largest auto lender reported a profit increase of 67%. Why ...

Published:  Fri, 19 Jul 2019 04:47:00 GMT



Wells Fargo sued for discrimination by DACA migrant who was denied auto loan

Wells Fargo was hit with another claim of discrimination Tuesday when an immigrant who was denied an auto loan accused the troubled San Francisco bank of withholding credit from migrants who live and ...

Published:  Tue, 16 Jul 2019 14:18:00 GMT



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