If you plan to get an auto loan, the real question is, how much can you afford per month? Find out how much you can afford before going to the dealership and being manipulated into making the purchase.
How much of my monthly income should go towards my car?
The answer will vary depending on your income. The Government of Canada recommends that all your monthly expenses should not be more than 40% of your monthly income.
Read Related Post: How Much Of My Monthly Income Should Go Towards My Mortgage Or Rent?
Tips when buying a car
When buying a car, you want to have a good downpayment saved up for it, preferably 20% or over. You’re borrowing less and you’re paying less also.
When buying a car try to limit the amount of time that is going to take you to pay it off to four years or less. Take into consideration how long you want to have that car. Some dealerships have five or even six and seven-year terms.
Pay your monthly fee plus some extra cash in order to speed up the paying off process.
Things to keep in mind when having a car:
- Highway Toll Routes
When owning a car, unexpected costs for repairs or parking tickets will also come your way. It is a good idea to have emergency savings account if anything breaks down and you require those funds right away. Keep in mind that without a car you may not be able to get to your job and therefore it is important that the maintenance or repair costs are covered right away.
Unsure if you can afford a car?
There are a few factors that affect a car purchase:
Your Credit Score: The dealership you choose to purchase your car from will take a look at your credit. That is the deciding factor for them to approve your loan or not. The better the credit score, the less time you have to wait to get approved, and the better your interest rate will be.
Debt: Buying a car means taking more debt on your shoulders unless fully purchased all at once. If you already have a heavy amount of debt and are behind on bills, it is not a good idea to take on more debt.
Willing to get help and get your dream car?
A Financial Advisor can help you get back on the right track, help pay off your debt, rebuild your credit score as well as help you invest your money into the right savings account for you. We can help make that dream car a reality.