How Much Can You Really Afford to Spend on Your Car

It can be pretty an easy task to get carried away when you buy a new car but it’s crucial that you don’t escape your depth. If you calculate your buying budget and stick to it before you hit the auto showroom then you’ll be much less likely to gain access to financial difficulty.

So, how much is it possible to really afford to spend on a whole new car?

A showroom full of shiny motors can be pretty tempting but it’s vital that you don’t let your heart run way ahead of your face in this sort of situation. The car which really sets your heart on fire could also be the one which breaks the lender.


When you go shopping for a new car you take both your heart and your head with you – a dangerous combination at the very best of times. Before getting carried away on a test drive and signing your excellent credit history away on the dotted line, it is essential that you calculate your exact budget. You could feel that it’s worth the buying price of living on water and bread for the next several months but you’ll soon tire of that – believe me.

There’s a lot more expense involved when buying a new car than the sticker price about the windshield. Here are some things which you need to think about when budgeting for any new car.


ZIP Code – the calculations for taxes and financial rates change from zip code to zip code so don’t forget to budget in any one of these often significant extras.

Monthly Repayment – this should include everything you should pay for the motor on a monthly basis, taking into account tax, registration fees, title etc. You are recommended that these payments don’t exceed 20% of your monthly, after tax income. Remember that there’s also gas, insurance and maintenance to think about.

Loan Term – the shorter the term of your loan the larger the repayments will be but the sooner the money will likely be repaid. Although it may be tempting to go for the maximum loan term possible this isn’t always a good idea. Choose a loan term which you can comfortably afford to repay and try not to exceed 60 months. When your car ages it gets more psychologically difficult to justify making payments on a motor which is far away from “”new”” any more.

If you have a car to trade in against a new vehicle you may want to consider putting the need for it with the dealer against the price of your brand-new car, worth of Trade-In -. The truth is that you will likely get a higher price for your personal used motor if you sell it off privately which would enable you to use a reduced loan amount. You will find benefits, however to having an old car as a trade-in. It is certainly a far easier option both during the transfer and in the future should anything go wrong with all the car you have sold. Of course if there is still money outstanding on your old car you must take that into account too.


Cash Down Payment – it’s smart to put down a large a cash deposit as you can possibly afford. Aim for at least a 20% deposit that can reduce the dimensions of the loan amount and hence the monthly repayments.

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