28 January 2014

How to Determine How Much You Can Afford to Spend on a New Car

Photo credit: freedigitalphotos.net

There is an incredible range of quality cars available on today’s market. It can be really difficult to make a decision about which one is right for you. You may head to the car yards with firm intentions in mind, only to find yourself bedazzled by all the shining models and makes you encounter. In this environment it can be very easy to be talked into buying something you can't really afford. You see something that really takes your eye, the salesperson explains all the reasons why it is the best car for you and how much money it will save you in the long run, and before you know it you have signed on the dotted line. But can you afford it?

If you have a good credit history and a solid job you will find you can probably secure a loan for almost any car on the market, but whether or not you can easily afford the repayments is another matter. Because buying a car can be such an emotional (and impulsive) purchase, it is really important to calculate how much you can afford before you visit the car yards. Once you have arrived at this figure do not be swayed by a persuasive car salesperson offering you the bargain of the century.

How Do You Calculate What You Can Afford?

Firstly, you need to figure out how much cash you can place on the car as a down payment. Also, factor in if you have a car to trade-in. The larger the amount you can take off the top of the car price, the less you will have to borrow and the less interest you will pay. It makes sense to try and make the biggest down payment you can possibly afford. Some companies will let you borrow money without a down payment, but this will end up costing you a lot more in the long run.

The next thing to consider is the monthly payments you can afford. Chat with professionals like Dreamloans who can help you work out your monthly expenditures against your monthly income and calculate accurately how much you can afford to pay on a car loan each month. Warning: never loan an amount that will require you to pay more than you can afford with your current wages and expenditure. Sometimes people are tempted into this, thinking they can cut back their other expenditure or work extra hours. Forget it! If you can't afford it in your current situation, do not buy it. Many people have fallen into this trap only to find they are in grave financial difficulties further down the track. You don't need the stress or the bad credit rating that will result if you can't meet your repayments.

By knowing how much your down payment is and how much you can afford each month, you can calculate very accurately what vehicle you can afford. It’s a buyer’s market, so buy within your price range.


  1. Yes, every move or plan about getting a new can be a daunting task. But of course, your intuition and projection plays a vital role in deciding.

  2. Remember we bought a van last year sis, it wasn't new so hubby , being a spender is planning to trade it in with a new one.. Typical.. lol.

  3. That's a good tip. I tend to spend a lot (hayok lang sa shopping hehe -bad choice of word ba haha), and I think your post also applies to money-threatening situations like shopping.

  4. to own a car isn't my priority list right now but I'm still planning to have one someday.

  5. Thanks for the info Ate Ria. I actually need this. Me and my parents are planning to get a car for our small business. :)


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