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      September 21, 2018

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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.

Second Chance Auto Financing in 2018: What You Need to Know

The auto financing landscape is changing in 2018, and you may have already been turned down for a car loan. But, you still have options available. Now is a perfect time to get into a second chance aut...

Published:  Thu, 20 Sep 2018 05:50:00 GMT



How to lower your monthly car payment

Listed below are several methods to reduce the monthly payment for that next new car or truck. Longer-term loan advantages Say a buyer wants a mid-sized sedan with a $30,000 purchase price. Two hypoth...

Published:  Thu, 20 Sep 2018 14:15:00 GMT



South Korean Finance Minister Optimistic About Revised U.S. Trade Deal

SEOUL-South Korean Finance Minister Kim Dong-yeon expressed optimism about signing a revised U.S. free-trade pact into law, though lawmakers in Seoul have threatened to block the deal if Washington im...

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Debt diary: How an engineer digs out of $100,000 in loans

Her goal To throw as much money as possible at the college and car loans. "I want them gone," she says. Beranek, 39, makes about $70,000 a year from her various work. She's made retirement a priority ...

Published:  Thu, 20 Sep 2018 10:14:00 GMT



Car Shopping By Click Hits Critical Mass

The startup offers pretty much everything a traditional car dealer does, including financing and warranties, plus a seven-day return window. This moment is, in essence, the company's de facto ...

Published:  Thu, 20 Sep 2018 04:18:00 GMT



Understanding the Risks of Short-Term Loans

which means you have to put up collateral to get the loan. For example, title lenders use your car's title as a collateral. You typically have to own your car outright to be eligible for a title loan, ...

Published:  Thu, 20 Sep 2018 03:18:00 GMT



Bavarian Sky China 2018-1 Trust -- Moody's assigns definitive ratings to BMW-sponsored auto loan ABS in China: Bavarian Sky China 2018-1 Trust

SEE ALSO: Danske Bank could be fined $8 billion after its huge money laundering scandal, analysts say »

Published:  Thu, 20 Sep 2018 07:14:00 GMT



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