Buyer Navigator Step 1: How Much Can You Afford?

The most painful scenario for first-time car buyers lies in determining what they can afford, or rather, what they can't afford. Know your budget, as this purchase is a semi long term commitment. Car dealers encourage you to buy as much car as your budget allows, but that's not the exact advice an economist would give you. Can you afford a car that costs as much as your annual salary? No. So how do you determine what you can afford? Get out that note pad. Map out your current expenses.

First, figure out your monthly income. It is wise to use net income so that you know exactly what is coming into and going out of your pocket. Next, calculate your monthly expenditures. Include debts, mortgage or rent payments, insurance, groceries, spending money, clothing, etc. This will not only help you figure out how much you can afford, but it will also allow you to see where your money is going. Now your uncertainty in this area is put in confidence, as to your auto purchase by knowing these figures. Remember, at AutoNetDirect, knowledge is power.

A new car should cost considerably less than a home mortgage. A good rule of thumb: your monthly payment for a car should be no more than 20% of your monthly net income. Remember that this rule of thumb applies to car payments as a whole. If you own two vehicles and make payments on both of them, the total of the payments for both vehicles should not exceed 20% of your monthly net income. This rule will be an asset for any shortcomings that may arise.

According to J.D. Power & Associates, the average sales price of a new vehicle today is $25,055 (this figure includes all light vehicles, both cars and trucks). With this in mind, it is important to know your budget. Preparation and knowledge are two of the most potent weapons you have as a consumer, so don't walk into a dealership without first sitting down and evaluating your finances. Again, you need to know.

* How much you can spend on a car
* How much you have to put down,
* How much you can afford per month.

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Knowing all three of these numbers is important. If you enter into negotiations only knowing what you can afford per month, for instance, the finance department may rip you to shreds by shifting numbers, extending pay periods and raising interest rates. If you are prepared in this area prior to arriving at the dealership, you'll walk away happy, knowing that you are paying exactly what you wanted per month. Therefore you will have an enhanced experience with your new auto purchase.

Some other things to consider when estimating the cost of a new vehicle are the costs of fuel, license, registration and insurance. Call your insurance company to determine what your monthly insurance cost will be for your top three vehicle choices.

Also, check here at AutoNetDirect:
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Keep in mind that some insurance companies may give discounts for vehicles with features such as side-impact airbags, ABS, and daytime running lights. Conversely, rates can be higher for young, inexperienced drivers or those with poor driving records.

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