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What You Need to Know Before Purchasing a Car

It can be exciting to buy a new car. A new car usually has features and upgrades that are not in your old car. The challenge is in knowing which car you can afford. Majority of people make late payments by choosing cars they cannot afford. Late payments can make one remain on credit reports for many years. Below is what you need to know to choose a car you can afford.

It is essential you look at your finances. Your financial situation as well as your credit score will help you to know which car you can afford. You need to consider your income. The car payments should not be more than 10% of what you earn. Take a look at the net pay and not gross pay. It can be hard to determine your income if you are a freelancer because it can be challenging to predict your income. However, there are still ways of keeping your finances stable. You can make average calculations of your earnings after taxes to get an idea of what you can afford.

Also, put into consideration the total amount you need to own the car. You will need to pay for insurance, gas, warranty packages and maintenance. The total cost should not be more than 20% of your take-home pay. Make calculations of the insurance and mileage to know the total cost. It is advisable to choose a car with better fuel efficiency.

Take a look at your obligations financially. Make calculations of your take-home pay as well as expenses. Financial obligations like mortgages can consume a big amount of your pay check. This shows you will be left with a small amount for buying a car. Knowing your financial obligation will help know what you can do without.

Also, your credit score will affect your financial picture. It helps determine whether you will get financing or not. Your credit score will also determine the interest rate. Your credit score needs to be high for more financial options.

Your finances and credit score will give you an idea of which car you can afford. You also need to money that is saved up for a down payment. There is additional fees that comes with the car’s price list. Down payment assists in paying for dealership fees, registration fees, title and state taxes. Add up the costs to know the worth of the car.

It is vital you take a look at auto loans. There are dealers who provide financing. Dealers are usually willing to work on pricing if you get preapproved for an auto loan. You can check online to know which cars are up for sale. View options of both new and used cars. Your financial picture will help in making your decision less challenging. A car that you can afford will help you avoid late payments.