How much did you have to pay for your next car?
A car is one of the most important and expensive purchases a person can make. That is why it is important to plan and prepare all the financial aspects that can be attached to it. The initial price is important, yes, but you must also think about the costs associated with its ongoing turnover: maintenance, oil changes, insurance, fuel, etc.
When shopping for your car, you want to consider the total cost of the car you are looking for. When entering the dealership, have a ceiling price in mind, to avoid that you are driven by the presentation and excitement of all new models. It is also necessary for you to be aware of your overall financial situation before starting the purchase process.
How to approach the down payment
There are two factors to consider in assessing the down payment you should make towards your purchase: your overall financial situation and associated responsibilities, as well as the price of the vehicle in question. If you have a lot of responsibilities and financial obligations, a large down payment can be difficult if not impossible to accumulate. If it is imperative that your purchase be made sooner than later, it is likely that you will not be able to save the necessary funds for a down payment. That being said, if you do not have as much responsibility, if your home is paid, for example, it may be possible for you to save a significant portion of the value of your purchase and apply it as a prime pay on the vehicle you want.
As mentioned, when evaluating the required deposit, we must also think about the price of the vehicle. It assesses the effect that a down payment will have on monthly payments and if it is appropriate. For example, a $ 5,000 down payment is huge when the vehicle in question is a $ 20,000 Honda, but the same down payment is reasonable – even low – for a $ 40,000 Mercedes.
How much can you afford in monthly payments?
The monthly payments and the total price of the vehicle are the magic formula to estimate the amount that you should apply in installment on this one. By knowing the total price of the vehicle and your ceiling for monthly payments, you will be able to begin to know the down payment required. That is: if you have a limited budget for your first payment and you do not want too much cash, you’ll have to limit the total price of the vehicle – or find a way to increase the sum of your down payment.
In addition, the total duration of your car loan will allow you to evaluate what your monthly payments will cost you. For example, a loan of $ 15,000 to 7% for 5 years will cost approximately $ 297 a month. The same loan over a period of 3 years will cost you $ 463 a month. The more the sum of your down payment and the longer the loan term, the less will be your monthly obligation. Be aware, however, that the longer the term of the loan, the more you will pay in interest charges. As the value of a vehicle weakens over time, it is important to avoid a loan duration that is too high: it is not wise to pay too much for a convenience that loses so much resale value.
Percentages are important
A large down payment is often a key step in being able to qualify for your car loan. A good rule of thumb is to pay a deposit of at least 10%. At 10%, you are less likely to have to pay exorbitant amounts every month and lenders will tend to impose less stringent constraints.
The first step towards buying a vehicle is therefore to save as soon as you have decided that you want to buy a vehicle. Take the time to calculate the monthly payment that the vehicle you want to buy will cost you and put that amount into a savings account until you are ready to make your purchase. This way you will have an amount to prepare for the down payment and your vehicle will be affordable.