How Much Should You Finance for Your Next Car
Harry Lloyd
Staying realistic
It is one of the most commonly asked questions before people set out to find the
best car financing they can. Strangely enough, nobody really wants to hear the answer, since they are always hoping it will be higher than what it ends up being.
There are a lot of things to
do and not to do with auto loans, but the most important thing is to be realistic. You normally drive alone and you drive across town for work, so do you really need an SUV? You almost live paycheck to paycheck, so do you really need a luxury brand? The same goes for additional features and options.
Few things can put a stranglehold on your life faster than an out of control car payment. Down sizing is not a bad thing, and with the quality of cheap new cars these days, it can hardly be considered as settling.
Crunching numbers
Experts agree, getting the largest down payment you possibly can goes a long way in getting an affordable car loan. A higher initial payment means you are borrowing less.
You should ideally try to get the down payment and trade in value to a total of 20% of the price of the vehicle. This means you will be financing 80% of the total cost.
Before you know how much you can spend on your monthly car payments, you need to get a firm understanding of your budget. It is very easy for car buyers to get wooed into buying a car that they really could never realistically afford to begin with.
Getting a handle on your finances also means getting a full credit report. Your
credit matters for financing a great deal. It will be one of the biggest factors in determining what kind of loan you get, and it is critical to be fully aware of your credit situation before hand.
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