How Much Car Can I Afford?

Lucy Lazarony
December 23, 2020

Wondering just how much car you can afford? There is a lot to think over. The first step is taking a close look at your budget. Is there room for a car payment in there? Don’t forget auto insurance. Will you be making monthly payments? Take a realistic look at your budget with the car payment and car insurance pencilled in. Can you live with these new expenses or will you have to cut elsewhere? Will you be able to handle rent and car payments in the same month? Having a place to live is more important than having a car to drive, so if you are going to struggle to make rent, you’ll want to re-think your car purchase or choose the most economical car you can find. How solid is your income? Unless you buy a used car for very cheap, car payments come once a month no matter what. If your income is inconsistent, use your leanest month as a guide to figure out how much you can afford every month.

Find the Car that Fits Your Budget

Let’s say you’ve got room in your budget for a $300 to $400 car payment. Do you want a new car or a used car? Used cars are more affordable but new cars are nice because they have never been driven before and there’s no worrying about what a previous owner did or didn’t do. There are also cash rebates and discount financing available on new cars. The cash comes in handy after just buying a car. And you can apply the cash to future car payments. And the rock-bottom discount financing is a great deal if you have got good credit. If your credit is so-so, you’ll have to stick to the cash rebate.

Do Plenty of Research

Know the make and model of the car you are looking for? Do plenty of research. You want to know the pros and cons about a car before you buy it. Check out Kelley Blue Book, Edmunds, Motor Trend, Car and Driver and J.D. Power for car reviews and pricing information.

Check Auto Insurance Rates

Shop Ahead for Financing

Whether shopping for a new or used car, you want to shop ahead for financing. That way a dealer will have to beat the best interest rate that you found on your own. Your bank or credit union is a good place to start. They know you and they already have a good relationship with you. There are plenty of online lenders that offer auto loans so be sure to give yourself plenty of options. You’re looking for the best deal you can find on an auto loan.

Crunch the Numbers has an auto loan calculator that asks you the car price, loan term, interest rate, down payment, trade-in value of an old car. Visit this site early and often. Know the car price and loan term you would like and the interest rate too? Check the numbers. What kind of monthly car payment do you get? Need that monthly payment to go lower? Throw a down payment into the mix. The bigger that down payment the more that monthly loan payment will creep down.

Shopping for Used Cars

Is a new car just too much for your budget? You may want to go the used car route instead. Sites such as, and Carfax make it easy to find used cars near you. Does the used car still have some of its original warranty? Be sure to ask. Don’t forget to check the vehicle history of a used car to find out the previous owner and its service record.

For used cars, you can shop dealer lots or from private sellers. If buying from a private seller, it’s a good idea to have the car checked out by a trusted mechanic before you buy it (more on this below).

Take a Test Drive

The test drive is very important and these tips can be applied to test drives at car dealerships or from private sellers.

Walk around the car and take a close look at the car’s exterior. Are there scratches and bumps? How does the bumper look? Is it clean or has the driver been bumping into quite a few things?

Look at the tires. Are they new? Has the tread worn evenly? Will you need to put a new set of tires on your to-do list if you should buy the car? Don’t forget to check underneath the car for any leaks.

Get in the car and start it up. Did it hesitate or did it start right up? Take the car for a short test drive. How is the steering handling? How are the brakes? How does the car accelerate? Next, turn on the air conditioning. How fast does the car cool down? You can test out the heater as well. How quickly does the car’s temperature change? You’ll want to know come winter or summer.

Test turn signals and test power windows and power door locks.

Mechanic Test for Private Sales

Once you take the car for a test drive, you’ll know whether it is a car you are interested in buying. Even if everything looks good, it is still a good idea to ask the private seller to bring the car to a mechanic that you trust. The inspection will cost between $100 to $200 and it is well worth the money. You’re paying for a professional for specific advice about the car you are looking to buy. It’s better to know of any problems before you buy.

Three Transactions for Dealer Sales

When you shop at a car dealership, there are three separate transactions you are making, your trade-in, the price of the car and the financing. Keep these transactions separate and get the best deal you can get on each one. Dealers try to roll these transactions together. Don’t let them.

Don’t Forget about Car Insurance

In the excitement of car shopping, you may have forgotten about car insurance. But you’ll need car insurance for your new set of wheels. The best way to get a good deal is to compare auto insurance offers from several different insurance providers. SmartFinancial makes this easy to do. With SmartFinancial’s help, you’ll be comparing auto insurance offers from insurance companies near you in no time. SmartFinancial has access to more than 200 insurance companies, so you’re bound to find the coverage and price you are looking for.

Get a Free Auto Insurance Quote Online Now.

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