Many people don’t know their spending limits, which can lead to financial trouble. Things like late or missed payments may be avoidable simply by setting up a monthly budget. Knowing how much vehicle you can afford before shopping can help you stay on track overall.
So, let’s assume you have decided to create a household budget before making your vehicle purchase. You’ve made a good decision. Why? Because knowing how much you can afford to spend each month can help you figure out what your price range on a vehicle should be.
To create a budget, make a list of your monthly expenses and how much you spend on each. This might include things like:
- rent/mortgage
- utilities
- internet service
- phone bill
- food/groceries
- student loan payments
- credit card payments
- insurance
- savings
- miscellaneous expenses
It’s important to know about how much you spend on each item, even if it’s not exact. For example, it’s likely your food/grocery bill changes a bit from month to month. That’s okay. The amount you write down should be the average of what you spend each month.
Next, what is your income? For many of us, this part is easy because it’s just the amount of our paychecks. But for others who are self-employed or have many sources of income, it might not be so simple. Make sure to account for any income that is used toward your monthly payments.
From there, decide how much you feel comfortable spending each month. In addition to your monthly payment, don’t forget to include things like insurance, fuel and maintenance costs.
Once you have an idea of the monthly payment that will work for your budget, it’s time to get pre-qualified with Drive®, with no impact to your credit score, and begin using the Budget Customizer! With the Budget Customizer you can select terms that work for you. We’ll match you with vehicles in your area so you can get a head start on finding the perfect car to fit your lifestyle and budget. It’s that simple.
