Tips and Hacks on How to Budget for a New Car

Are you looking for a new car? That's an upgrade, congratulations!

But first, determine what you can afford if you are in the market for a new vehicle.

If you're considering leasing the car, evaluate your total costs involved because you will spend = approved loan amount + down payment (cash) + trade-in total.

Look for the below factors when deciding the budget for your new car:

1. Gross Price - Your vehicle's entire cost is always more than just the mentioned price; it will also include things like tax, title and registration fees, accessories, etc. Keep these in mind and leave yourself to maintain a room within your budget for all of these expenses. Remember that there is also more to it: insurance, diesel, regular servicing, repairs, registration, and other costs attached to it regularly.

2. Monthly Deposits - If you are financing, you will need to evaluate your monthly payments. You are keeping in mind that your monthly payment will include both interests and the principal amount. The loan period, interest ratio, and down payment will affect your costs. If you can delay your purchase until the goods go low, then you can get a more upgraded vehicle or save money on your payments.

3. Deposit Money - Most vehicle purchases are made with an initial down payment. The more you deposit in your down payment, the lower your monthly bill will be.

4. Trading Your Old Car - Have you considered selling your old car? It will surely help you reduce your new vehicle's total cost, plus it can help you improve your loan period. This may also give you more leverage when negotiating the new car.

5. The 10–20% Law - For drivers who want to be cautious when purchasing, you will have to contribute about 10% of your income towards it. Meaning that if you make two lakhs per month, then 20,000 will be contributed every month for all of your vehicles. Some people contribute 20% too. Even when you are not financing, then the 10-20% rule still applies. 20% of your annual income determines how much you can afford on a vehicle. For instance, at $36,000/year, you can spend approximately $7,200 yearly on your vehicle ($36,000 x .20 = $7,200).

6. Aggregate Debt - If you have a lot of debt currently and do not want to add more onto your existing. Consumer Reports shows that it's best to spend not more than 36% of your total monthly income on your debt. Make a list of your monthly debt payments, credit card bills, and loan payment. Once you've numbered these, subtract it from the 36% of your total income to evaluate how much you can realistically add.

7. Affordability Calculators- Every person has a different, and only you can determine your budget and how much you are willing and will be able to spend on a new car. Fortunately, there are various free affordability calculators online which can help you calculate your price range. It can even look out for things like your loan period, finance rate, deposit amount, and even the value of your trade-in.

Remember, while vehicles might be a necessity, they shouldn't be a financial burden. A careful budget will help you cover transportation costs and keep you on a path to financial success. And now that you know what you can afford remember to look at the vehicle's total cost, including financing. Time for the fun stuff - car shopping!

(Check out 'Learn & Grow with Wizely' 'to read and learn all about budgeting and importance of spending right.)