Setting a Used Car Budget

 

The operative word in the title of this article is “Budget.” A car budget is the maximum amount of money that someone can afford to pay for a car. There is a catch, though. It is important to realize that this is not just the price of the car itself, it includes all the costs that keep the car on the road. Many buyers make the mistake of thinking they can afford a certain price car and get into trouble when the additional costs occur. Here’s are some tips on getting your car budget correct.

Set the Initial Budget

You can't really shop for your next car if you don't know what price range you are looking in. So, before you even begin reading vehicle reviews and looking at used car inventory online, take a close look at your finances. How big of a monthly payment can you put towards your car? If you have paid off your current car, this will be a completely new expense. So it is important to get it right. Determine a max number that you absolutely can't go over, as well as an ideal number, something that you know for sure you can easily handle. Some financial advisors recommend the 20/4/10 rule. This rule applies to details of automotive financing. First, the 20 refers to the amount you should put down, which is some 20% of the purchase price. The 4 refers to the length of the loan duration in years and the 10 is especially important; it refers to the maximum amount of your gross income that you should put towards your vehicle. This maximum should include not just your monthly payment but insurance, gas, maintenance and other expenses.

Looking For a car

Once you have set a budget, its time to go looking for cars. Try not to fall in love with a vehicle simply for its looks. A sporty coupe is fun to drive and looks great in your driveway. But if you will be hauling your family on a daily basis, it's not the ideal choice. Consider how many passengers you have on a regular basis. Do you need much cargo room? How important is fuel efficiency? Will you need towing or hauling capability? Once you know the general type of vehicle you are going for, you can narrow it down to a few makes and models - that not only fit your needs and wants, but also your budget. 

Visiting the Dealership

So now you know your general budget, and have your sights set on a few models. You have read reviews online, and even looked at your dealer's inventory. It may be time for a trip to the dealership. A few things can be accomplished here. Do you have a trade-in? You can get an estimate of what you will get for your current car online, but to get a specific number, the dealer needs to take a look. This is important, because you can factor this into your budget. Next up, take any potential vehicles on a test drive. It may fit your ideal description of a car, but you need to make sure the driver's seat is comfortable, and the handling feels good to you. Take it into various driving situations, including highway, city, curves, and hills. Lastly, speak with your dealer! They are experts in the car industry and can give some great advice. For example, if you have your eye on a particular car, but it's simply over your budget, they may be able to steer you toward a similar model, or the same model but the previous year. 

Consider Other Costs

The cost of vehicle ownership needs to be considered as well. Compare your new vehicle to what you are currently driving. Will the costs go up? If you have an older model, and are purchasing something that is just a few years old, your monthly insurance will increase. What about fuel costs? Many times a newer vehicle has better mileage than older ones. But if you are going from a sedan to a full-sized SUV, it only makes sense that you will be spending more on gas. While these other costs might not affect your budget a great deal, they should certainly be a piece of the plan.

Think Smart

Our best piece of advice when it comes to buying a used car is to simply think smart. Set a budget and stick to it. Remember to consider the total monthly sum of money that your car will cost you (includes insurance, gas and maintenance) not just the price of the car itself. There are so many used cars, trucks, SUVs and minivans out there. Do not let yourself get emotionally attached to something that is over budget. If you see something you love, check the price first, before you check out the details. If it's way over budget, the best thing to do is to move on to the next car. 

Mr. Ed Can Help

Regardless of your budget, Mr. Ed will work with you to get you into a vehicle that meets all of your needs. You can view our complete used car inventory right on our website! If you are looking for some general guidance in your used car shopping process, we are happy to help! Give us a call or stop by at one of our many locations. Our friendly sales and finance teams are standing by to work with you on an individual basis. We will take into account all aspects, including your monthly target budget, overall price, and specific details about the vehicle you are looking for.