Our financial experts have laid out some useful guidelines below for deciding what you should pay for a vehicle every month. Having affordable car payments can actually help you improve your credit (because they let you pay them on time), so it’s important to be realistic about what you can afford.
Setting a Budget for a New Vehicle
When you’re shopping for a new vehicle, keep in mind that the total cost goes beyond a dealer’s asking price. Make sure to include the following in your budget:
Features: Factor in any additional features or upgrades into the total cost of the vehicle. The higher the trim and more amenities you include, the more expensive the vehicle will be.
Warranties: Almost all new vehicles come with a guaranteed manufacturer’s warranty. However, if you’re buying a pre-owned vehicle, it’s a good idea to consider purchasing a warranty from the dealership itself.
Cost of Ownership: This includes car insurance, registration fees, servicing, repairs, and fuel costs. Average out a general estimate of how much you’ll be spending a year, then divide that cost by month. You’ll want to include that number in your budget moving forward.
Setting an Affordable Budget for a Car Loan
To determine how much you can afford on a new car loan, calculate the expenses you already have against your total monthly income, after taxes. This includes things like rent or mortgage payments, utilities, cable, and every day expenses like grocery shopping and a gym membership.
After you’ve subtracted these expenses from your income, you’re left with an amount of money you can use however you’d like. While some of that should be set aside for a rainy day, the rest can go towards a new vehicle payment if that’s your primary focus.
Hint: Remember to set some money aside for extracurricular activities, like dinner outings or a night at the movies. Having no money to do anything fun with gets old fast. That being said, if that’s not your lifestyle, don’t worry about it!
Financial experts recommend keeping your car payment and related expenses at 20% of your monthly income, or lower. This is just a suggestion, however, so if you’re struggling with bad credit and looking to reestablish a reliable borrowing history, by all means spend less.
Example: If you’re taking home $4,000 a month after taxes, you should be spending no more than $800 a month on a vehicle. And, like we suggested earlier, make sure to factor in things like maintenance and fuel costs. That being said, $500 to $550 a month would be a reasonable car payment, with the remaining $300 or $250 to be used towards other vehicle expenses.
Find a Car Payment You Can Afford with My Ride
What you can afford to spend on a vehicle is entirely up to you. It doesn’t hurt to have a little help setting a realistic budget, though. If you’re struggling with the math, or are just afraid of overextending yourself, let us do the heavy lifting for you.
We specialize in helping people with all types of financial situations get into a car at an affordable price. Good credit, bad credit, or no credit at all, we can help.
We also offer one of the largest inventories in Western Canada, including over 20 brands and 10,000 vehicles; cars, trucks, and SUVs; new or used. Whether you’re looking to spend a little or a lot, there’s no doubt we can help you find the perfect ride in your area.
Are You Worried About Being Denied?
Thousands of Canadians struggle with bad credit. Don’t let credit issues stop you from applying for a car loan. If you’re in desperate need of a vehicle but think you won’t get approved, contact us today.
We’re in the business of approving people. Just ask the 30,000 Canadians we’ve already helped choose, budget, and finance a vehicle. The banks may have turned you away, but there’s no reason to stress when you apply with us. We can work independently of the banks, if need be, which means you don’t have to face another rejection. We’ll use our own money to get you into a car you love at a price you can afford.