For those looking to purchase a new or used vehicle, there are many different factors to consider when determining if your budget can afford the new monthly payment. In addition to your new investment there are other costs involved that could bring the overall price beyond your budget. Between the average miles per gallon of the car to insurance costs, buying a vehicle is much more expensive that just a car payment.
Many people do not consider the interest rate that they will have on a new vehicle when they initially divide the price of a car with the number of months on a loan. Interest rates can easily tack on hundreds, and sometimes thousands of dollars to the final vehicle loan amount. Those with higher credit scores in the 700 to 800 range have a better chance of attaining a lower interest rate and in some cases may get a vehicle with a zero percent interest.
But for those with bad credit, high interest rates are typically the norm due to a poor credit history. Most banks may even deny your request for a loan altogether. If this happens to you your best bet would be to work with a bad credit used car dealer to negotiate a rate. A high interest rate is still better than no loan at all and bad credit used car dealers can work with you to get you into a car you can afford and a loan payment that won’t break your budget.
The cost of gas for a new vehicle can end up being several hundreds of dollars each month, depending on the fuel efficiency of the vehicle and its size. A Scion XD often runs 33 mpg for the highway, while a Ford Expedition is as low as 15-20 mpg. It’s important to calculate how many miles the car will be driven each month and to determine if you can afford the extra money for gas. The EPA recently released a tool to help you estimate gas mileage for used cars. The tool can be accessed online and is also a great way to check the carbon footprint of the vehicle you are about to purchase.
Insurance can increase significantly with a new vehicle, especially if you are upgrading to a larger, less economical vehicle. Several factors that can increase rates include the number of doors on the vehicle, the age of the vehicle, and the amount of miles that it’s expected to be driven each month.
It can be easy to forget about how much it will cost to simply maintain your vehicle, but it’s important to calculate to ensure that your budget can cover the costs throughout the year. Some vehicles require synthetic oil for oil changes, which is often double the cost of conventional oil, while some cars may need more frequent tune-ups than others.