How Much Should you Really Spend on a New Car?
Buying a new car can be expensive, especially in countries such as Singapore, Cuba, Brazil, China, Indonesia, and Malaysia. If you are new to the scene, then you might get overwhelmed with your choices and the amount that you would have to spend.
Before anything else, you have to decide if you want to get a rent to own car or a brand new one. Both have their own pros and cons, which is mostly the case with buying your own property. Cars are expensive, and even the cheapest ones can cost you a fortune. The fees do not stop at buying it, as you also have to think about the maintenance and repairing costs.
So, how much should you really spend when buying or having your own car financed? Here is a breakdown of everything you need to know.
Put at Least a 20 Percent Down Payment
Make sure you have at least 20 percent of the total cost of your new car, and you must be ready with the cash even before deciding which car to get. This way, you wouldn’t have to worry about the monthly or weekly payments too much. Putting a bigger down payment would ensure a smaller weekly or monthly repayments, which will actually make your life easier in the long run. If you find it hard to pay at least 20 percent of the down payment in cash, then rethink your decision – as the car that you have decided on buying might be too expensive for you.
Only 10 Percent of your Income
It is important to note that you should not spend more than 10 percent of your income on buying or getting a new car finance. If you can lower your spends than 10 percent, then that is even better. Only 30 percent or less of your income should go straight to paying your loans and debts, while the other 70 percent should be allotted to groceries, house utilities, food allowance, savings, and miscellaneous. Look for lenders or dealers that offer loans with longer paying terms, so you would not have to sacrifice paying more than 10 percent each month.
Decide What you Really Want or Need in a Car
Are you a huge car person or you just need a simple car to get you to and from work? If you are the former, then it would be fine to spend 30 to 40 percent of your income on a new car. That is if you are sure that you can pay your dues on time, and you have little to no debts at all. If collecting and getting new cars is your hobby and you know that you can afford it, then go ahead and spend more than the recommended amount. However, if you just need to use your car for running errands and for work, then it would be best if you follow the 10 percent rule.
It Depends on your Expenses
At the end of the day, your budget for spending on a new car still depends on your budget. Compute everything you are currently paying for, and the basic necessities that you spend on every month. The first thing to take into account is your salary, or how much money is regularly coming in.
Buying a car, or even having it financed is a huge responsibility, and it should be carefully mapped out before you even go in and taking the plunge. Take these things into account, and you are definitely on your way to a successful car purchase. We wish you the best of luck, enjoy your new car!