Getting a new car takes careful planning and budgeting to keep car loans from ruining your financial goals. The key here is to have a car budget. Know exactly how much the car loan would cost and if you can afford it.
To Stay Within the Budget When Getting Car Loans, Here Are 3 Essential Tips for Car Budgeting:
Write a Detailed Household Budget
Probably one of the most important tips for car budgeting is to write a detailed budget of all the expenses of your household. A good rule of thumb to follow here is the 50-30-20 rule. The 50 percent of your income should be used for necessities like mortgage and utility bills.
This is where your monthly car budget will go, folks. Second, the 30 percent should go to wants like dining out or going to the movies. If you can lower this, that’s better. Finally, at least 20 percent should go to your financial goals like an emergency fund, retirement fund, or paying off debt.
Now that you have this budget, you’re in a better place to assess how much you can spend on car loans and car utility and maintenance bills.
Search Only for What You Can Afford to Pay
When you’ve considered all factors such as your budget or the kind of car that you need, you can now go and shop around for the best car loans for you.
Whenever you’re out shopping for cars, bring the household budget or at least keep the figures in mind to keep yourself from getting a deal that’s way beyond what you can afford. There are so many sleek cars that seem to be calling out to you, but you need to resist the temptation and stick to your budget.
When you’ve spotted a car that you want, get a detailed breakdown of the car loan repayment terms including the interest rate. You want to know exactly how much you will have to pay each month. Tip: If you’re still unsure of what car loans to get, the financial experts at www.clickfinancial.co.uk will be happy to help. In Click Financial, you can get expert opinions on what car loan can fit in your budget.
Write a Detailed New Car Budget
Armed with your household budget and the detailed breakdown of the car loan repayment terms, you then need to write a detailed car budget. This budget should consider all expenses that come with a new car such as monthly repayments, fuel, maintenance costs, and others. Then go back to the household budget and see how the car budget fits in.
If you’re going to have to cut a significant chunk from either the 30 and 20 percent, chances are you need a more affordable car.
Careful budgeting is often what it takes to get a car loan that you can manage. You need to have a detailed car budget to see if you can really afford the car before buying it. Minimize financial mishaps with these three practical tips for car budgeting.