Have you been thinking of getting a new car but second-guessing if you can really afford it? Well, you don’t need to if you check these 12 boxes.
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You Can Afford a 48-Month Loan Term
The first sign is if you can comfortably finance the car for four years or less. A higher loan term means higher interest, and you are at “risk of financing a used vehicle for longer than expected reliable service life.”
You’ve Set a Budget for Insurance
Also, if you’ve asked for an insurance quote and feel confident paying it, you are ready to get a new car. Some people make the mistake of buying the car before getting the quote, only to discover they don’t have enough funds for the insurance. Keep in mind that car insurance is mandatory.
You’ve Calculated Your Living Expenses
Suppose you’ve accounted for savings, food, bills, entertainment, and emergencies and can handle financing a brand-new car, gas prices, insurance, and unexpected repairs. In that case, you are also fit to get one.
You’ve Set Aside Yearly Maintenance Costs
Again, if you’ve broken down the yearly cost of maintenance and the figures don’t scare you, you are good to go. This includes “wiper blades, engine air, cabin filters, and tires.”
You Have an Emergency Fund
Next, if you have an emergency fund that can last you (and your family) 6 months, are saving for retirement and short and long-term goals, and have always maintained a realistic budget, you are on the right track.
You’ve Accounted Gas Prices
Another sign is if you’ve checked your preferred model’s engine size and are confident about fueling it.
You Know How Much You Drive
A user explains, “If you only drive 5,000 miles annually, you can get away with buying a cheaper, high-mileage car. But if you drive 5,000 miles per month, you may want to consider getting a lower mileage that won’t need to be replaced yearly. You will pay more for the vehicle but will likely be left with a more reliable one.”
You Can Afford Unexpected Repairs
It’s impossible to predict when a car will break down. However, you can tell you you can get a new car if you’ve raised extra money for emergency repairs.
You Can Make a Sizeable Down-Payment
The payment can be in the form of saved cash or trade-off a car you own. You are also good to go if you can afford a sizeable amount (20% or more).
Your Car Shouldn’t Be More Than 30% Of Your Gross Income
“If you make $45,000 a year, look for cars valued at $13,500 max. (In this case) an $8-10k car would be better,” explains a user. Setting aside 30% of your income ensures the car’s expenses don’t overrun other essential needs.
You Don’t Treat Cars as an Investment
Instead, you treat cars as an essential asset to get you places and a living expense like food.
You’ve Looked at Lease Rates
Lease works best for people who “value driving a car that never requires maintenance and never having to think about transportation.” However, if you’ve looked into leasing and rates and it doesn’t entice you, there’s your other sign.
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