A good rule of thumb is to aim for at least 20% of the car's purchase price. So, if you're eyeing a $20000 car, having $4000 saved for a down payment is a good starting point. Taxes and Fees: Don't forget about TAXES and FEES, which can add a few thousand dollars to the cost of the car.
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.
Buying a used car for less than $10,000 can get you behind the wheel of a reliable and good-looking ride without costing you a fortune. However, you must prepare for potential repairs that can empty your wallet even though you might not break the bank with upfront costs.
What is the average down payment on a car? The typical down payment for a car is between 10% and 20% of the vehicle's total value. Used cars usually require down payments closer to 10%, while the down payment for a brand-new car is generally closer to 20%.
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
How much should you put down on a car? A down payment between 10 to 20 percent of the vehicle price is the general recommendation.
Finally, apply the 10% rule.
Take your monthly income and divide it by 10. Your total car costs each month should be no higher than that. That includes your car payment, insurance, maintenance, and gas. (Your insurance company should be able to give you an estimate before you buy the car.)
Experts say your total car expenses, including monthly payments, insurance, gas and maintenance, should be about 20 percent of your take-home monthly pay. For non-math wizards, like me – Let's say your monthly paycheck is $4,000. Then a safe estimate for car expenses is $800 per month.
The 20/4/10 rule is a general guide to car buying. It advises that you put 20% down on a 4-year auto loan and spend 10% of your salary on transportation costs.
The minimum income necessary to qualify for an auto loan may vary, but most lenders prefer an applicant to have at least $1,500 to $2,000 in monthly income before taxes.
To get an idea of how much car you can afford, a good rule of thumb is to pay no more than 35% of your annual pre-tax income. So, if you make $50,000 before taxes per year, your car purchase price should not exceed $17,500.
NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
So, how much should you spend on your first car? The answer is “it depends.” You should clearly know what you need before browsing and not be afraid to walk away from a deal if it doesn't feel right. Experts recommend spending between $10,000 and $25,00 on your first car, hence the recommendations in the article.
At the bare minimum, your savings goal should equal an appropriate down payment amount. Typically, this is 20% of the total cost of the car. If you are planning to take out a loan to buy your car, have at least 20% of the total price ready to pay in cash as a down payment.
Set your car payment budget
50% for needs such as housing, food and transportation — which, in this case, is your monthly car payment and related auto expenses. 30% for wants such as entertainment, travel and other nonessential items. 20% for savings, paying off credit cards and meeting long-range financial goals.
A person making $60,000 per year can afford about a $40,000 car based on calculating 15% of their monthly take-home pay and a 20% down payment on the car of $7,900. However, every person's finances are different and you might find that a car payment of approximately $600 per month is not affordable for you.
The average monthly car payment is $737 for new cars and $520 for used. Several factors determine your payment.
To apply this rule of thumb, budget for the following: 20% down payment: Aim to make a 20% down payment on your new car. 4-year repayment term: Choose a repayment term of four years or less on your auto loan. 10% transportation costs: Spend less than 10% of your total monthly income on transportation costs.
Financial experts recommend that your monthly payment should be around 10% to 15% of your monthly take-home pay. Additionally, your total monthly car expenses should be no more than 20% of your monthly income, and this includes your car payment, insurance, maintenance and gas.
Fortunately, there are some vehicles around the $10,000 price range that are worth checking out. This mostly includes models that are at least five or 10 years old, but even then, many of these cars are still reliable and will get you where you need to go.
A $30,000 auto loan balance with an average interest rate of 5.0% paid over a 5 year term will have a monthly payment of $566. In total, the loan will cost $33,968 with $3,968 in interest.
If you don't make a down payment, you'll need to take out a larger loan to cover the purchase price for the vehicle you wish to buy. As a result, you'll likely end up paying more in interest over the lifetime of the loan since you're borrowing a larger amount from the start.