Spend Wisely - Buy A Car You Can Afford

Amanda Peterson

June 28, 2023  •  2 Minute Read

Money Saving Tips

This week we talk about spending wisely. Let's talk about car shopping. We know the fancy car with all the bells & whistles is nice to have. However, when you take a quick peek at your bank account, that idea may differ. This week we discuss buying an affordable car.

New Car vs Affordable Car

When it comes to buying a car, there are often two main options: a new car or an affordable car. While a new car may seem like the more exciting choice, it can also come with a much higher price tag. On the other hand, an affordable car may not have all the latest features, but it can still provide reliable transportation without breaking the bank. Ultimately, the decision between a new car and an affordable car will depend on your budget and priorities.

The benefits of a brand new car will obviously outweigh a used one. However, an affordable "new to you" car isn't all that bad. And unless you have a money tree in your back yard, the used car will be your best bet if you're looking to save a buck or two.

Stick to the 20/4/10 Rule

It's important to spend within your means. Don't fall into the trap of buying a car that stretches your budget too thin. Stick to the 20/4/10 rule. Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses. These expenses include any money you put towards your new vehicle, including gas, insurance, and loan payments.

Spending Within Your Means

Instead of buying a car that maxes your budget, focus on purchasing a vehicle that you can comfortably afford. This means considering not only the initial purchase price, but also ongoing costs such as insurance, maintenance, and fuel expenses. By being realistic about what you can afford, you'll be able to make a smart purchase that won't leave you struggling financially. Remember, it's better to have a reliable car that fits your budget than to be burdened by a high car payment.

Wrapping It Up

One last thing to keep in mind when shopping for a car is to make sure your main needs are taken care of first. Home, utilities, and food. Once you figure out where you stand on those items, you will have a better idea of how much you can spend comfortably on a car payment. A new car may not be the way to go right now, but if you invest on a good used car, you can drive that one until you've saved enough to pay for a new car.

Keep following us here at CreditSoup.com for more tips on saving money and cleaning up your debt!