4 Things to Consider While Budgeting for a New Car

Wednesday, September 16, 2020, 6:00 PM | Leave Comment

A vehicle is not just a basic necessity but also the most expensive purchase that most people will make after their home.

The high cost of a new car combined with lengthy loan terms means that buyers must plan carefully to work this expense into their budget.

Whether you’re purchasing a car for your daily commute, as a gift for your teen driver or a fun treat for yourself, here are four things to consider when budgeting for your new ride.

4 Things to Consider While Budgeting for a New Car

  1. Down Payment

    The down payment is the first and largest expense you will face when purchasing a new car. A down payment is a portion of the car loan that is paid upfront, and the amount required depends on the amount of the loan and your personal creditworthiness. Keep in mind that making a larger down payment will reduce your monthly payments and lower the amount of interest you pay overtime. If you already own a car, you can also trade it in as part of your down payment.

  2. Monthly Payment

    You’re going to be stuck with your monthly payment for years, so make sure you can afford it without sacrificing other necessities. If you’re unsure whether the new car you want will take too large of a bite from your monthly expenses, try setting the amount of the payment aside for a few months. You can use these funds for your down payment later.

  3. Maintenance Costs

    Oil changes, tire rotation and alignment are just some of the routine maintenance costs you will need to budget for to keep your new car running smoothly. Auto manufacturers are constantly innovating with new features, so consider taking your new vehicle to a mechanic with the most up-to-date knowledge about your specific make and model. For example, the Ford service center at your local dealership can provide the most efficient care for your new Explorer, Mustang or F-150.

  4. Insurance Premiums

    Although it’s illegal to drive without car insurance, approximately one driver in eight is still uninsured in the United States. Foregoing insurance can cost you thousands in fines, repairs and liability, so make it a priority to factor those premiums into your new car budget.

If you have determined that you can’t afford a new car, don’t worry. There are plenty of reliable used and certified pre-owned cars available to suit even the tightest budgets.

Remember to budget for higher maintenance and repair costs when purchasing an older car and consider adding an extended warranty.

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