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Tips for determining your ideal car budget

Tips for determining your ideal car budget

 

When you’re car shopping in Oakville it can be hard to know where to start.  What are your options for financing and how can you determine your budget?  Let’s break it down.

Final Price

Remember that the sticker price isn’t the full cost of the vehicle.  There’s sales tax, title, and registration fees along with any optional fees such as for an extended warranty.  If you determine your budget for a car is $9,000 and the sticker price is $8,999, you’ll be over budget immediately.

Additional Costs

In addition to the initial purchase of the vehicle, you’ll have to factor other regular items into your budget as well: gas, insurance, maintenance, registration, and any repairs that come up.  Give yourself a cushion between your budget and the car you choose.

The 10% Rule/ The 36% Rule

A general rule of thumb some people follow is to use 10% of their income as their monthly budget for their vehicle.  That can be a very frugal approach and may limit the selection of vehicles you can look at.  A more realistic number is 20% of your income as a benchmark for spending on a car.

On the other hand, it’s important to consider your debt-to-income ratio.  Your goal should be that no more than 36% of your monthly income goes towards paying credit cards, other loans, and your car payments.

Down Payment

If you are able, making a down payment will always decrease the amount of the loan you’ll need to pay for the rest of the vehicle.  Or it may open up your options to a more expensive vehicle than if you’re fully financing.

Car Loan Calculators

Many sites offer free car loan calculators that factor in interest rates, term length, and down payment to provide you with your ideal monthly loan payment.  These are a fantastic tool to ensure you’re making to right decisions financially.

When you’ve finished your research, you can browse the selection of used vehicles Car Nation Canada Direct has to offer and apply for pre-approval on financing all on the site.  We make it easy to find your perfect car.

 

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