Understanding Your Used Car Budget

Understanding your BudgetBefore you purchase a car, it is important to understand how much you can afford to pay. Too many people buy cars on a whim, without considering the impact a vehicle will have on their monthly finances. Certainly a car might be essential to your daily life, a vital companion to get you from place to place, but if it costs you so much you cannot pay the bills, it is not helping! Here is some basic information about pricing your used car as well as tips and tricks to understand your used car budget to buy a new vehicle.


How Do You Formulate A Used Car Budget?


Basics of Used Car Budget

There are a number of factors that go into determining your used car budget. These go far beyond the price of the car, and even beyond the interest rate you will pay on your financing deal. Your location, term of your loan, trade-in value, down payment and other aspects of negotiating the deal will all play an important part in determining what you are going to pay out for that new-to-you car.



Too many people fail to consider their address and zip code as a factor in forming their budget. Believe it or not, your zip code is how your taxes and interest rate are determined.


Target Payment

Understand how much you can afford every month. While most negotiation experts recommend negotiating the sale price as opposed to monthly payment, you will still have to account for the bills you pay!


Term of Loan

It is inadvisable for most used car loans to finance longer than 60 months, or 5 years. This is because while installments will be lower, the chance for expensive repairs increases.


Finance Rate

The percentage of interest you pay on your loan can vary wildly based on the very day you obtain financing as well as your credit history, location and other factors. You will need to be well aware of this rate as you determine your budget.



Your trade-in vehicle (if any) will affect what you pay out, as the first thing you will have to do is pay off any money you still owe on that car. The remainder will lower your overall payment. Be aware of the Blue Book and actual market value of the car you are trading in.


Down Payment

Are you putting money down on the new car? Are there incentives you are getting from the dealer such as special discounts? It is always a good idea, if you can, to put down 20% of the value of the car you are buying as this will lower your interest rate and get you a lower overall purchase price.


When the time comes to figure out your budget, it is a great idea to find a car finance calculator online. If you are looking to pick up your next vehicle, try using our budgeting calculator tool and get in touch with us for financing today!

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