Whether you’re tired of spending money monthly on car repairs on your current car, are purchasing your first car, or are tired of purchasing used cars off of Marketplace and Craigslist that don’t last long, you’ll probably wonder what’s a reasonable car payment when you consider purchasing a car from a car dealership.
Understandably, especially with gas and food prices currently on the rise, you don’t want to add on another recurring monthly payment that you may not be able to afford.
This post is going to help you determine how much you can afford to spend on a new car.
Know your credit score
While there isn’t a magic credit score for determining whether or not you are approved for a car loan, you want to make sure that you have a good credit score to get the best interest rate.
While those who have poor or fair credit scores can be approved for auto loans you’ll get fewer offers and higher interest rates.
Therefore, before you even start thinking about adding a car payment to your recurring monthly bills, it’s important to know your credit score.
If possible, if your credit score is below 660, try to increase your score before applying for a car loan.
Consider your income
What’s considered a reasonable car payment for one person, may not be a reasonable car payment for the next person.
There’s no universal reasonable car payment.
Instead, you have to consider your income, to determine what is a reasonable car payment for you.
Ideally, when buying a new car, you’ll want to make sure that your car payment is no more than 10% of your monthly take-home income.
Keep in mind that the are other reoccurring car expenses that you’ll also need to add to your monthly budgets such as car insurance, taxes, gas, and maintenance.
Use a car payment calculator
An easy way to determine what’s a reasonable car payment for you is to use a car payment calculator.
You’ll be able to get an estimate of how much your monthly payment will be based on various factors such as purchasing a new car vs purchasing a used car and trade-in vs no trade-in.
If you use CarPaymentCaclulator.net, you can even enjoy some arcade games after getting all of your estimates.
While there isn’t a universal reasonable car payment, reasonable car payment for you would be no more than 10% off your take-home income.
Keep in mind that you’ll also be adding on additional recurring car expenses when purchasing a car.