How much would a $30,000 car cost per month? This all depends on the sales tax, the down payment, the interest rate and the length of the loan. But just as a ballpark estimate, assuming $3,000 down, an interest rate of 5.8% and a 60-month loan, the monthly payment would be about $520.
The rule recommends making a 20% down payment on the car, taking four years to return the money to the lender, and keeping transportation costs at no more than 10% of your monthly income.
Used cars are easier to get financed for depending on your credit new cars have a higher value and there for lenders get squeemish lending on a new car more than that of a used car!
Dave says only buy a new car if you have a $1M net worth. He'd recommend to buy a used car that isn't more than half your annual income.
Experian estimates that new cars lose 20 percent of their value in the first year, and depreciation continues for the first 10 years of ownership. Higher insurance costs: New cars often cost more to insure because of their higher chance of theft, value and other related factors.
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.
It may be easier to secure a loan for a new car than it is for a used car, and new car loans often come with lower interest rates. Used cars can be a good fit if you're on a budget and they generally cost less to insure; however, interest rates for used car loans are often higher than for new car loans.
Pros. May help you get the best terms: Dealers generally work with a limited set of lenders, who may not offer the ideal loan terms. In addition, dealers may add a markup to the annual percentage rate (APR) as compensation for arranging the loan. When you work directly with a bank, you won't have to worry about this.
It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate. But how much a down payment should be for a car isn't black and white. If you can't afford 10% or 20%, the best down payment is the one you can afford.
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.
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.
For example, the interest on a $30,000, 36-month loan at 6% is $2,856. The same loan ($30,000 at 6%) paid back over 72 months would cost $5,797 in interest. Even small changes in your rate can impact how much total interest amount you pay overall.
An increase in your monthly payment will reduce the amount of interest charges you will pay over the repayment period and may even shorten the number of months it will take to pay off the loan.
72-Month Car Loan Rates Are Typically High
A high interest rate means you'll end up paying more for the total cost of the car when all is said and done and you've made all your loan payments. Paying more money in interest has no benefit, and some people consider it to be wasted money.
Negotiating your interest rate can help save you hundreds or thousands of dollars over the life of the loan. Negotiating can be as simple as asking the dealer if those are the best loan terms they can offer you or by pointing out lower rates available at a competing lender.
Key takeaways. Investing in repairs for an old vehicle may not always be the best move for your finances. Repairing an old vehicle can help you avoid high new and used car prices — and high interest rates. If you're facing expensive repairs on an older vehicle, buying a new vehicle may save you money over the long run.
Also, if you decide you want a 36-month loan term instead of a 60- or 72-month agreement, your monthly payment will be higher. This could affect your decision about financing a used vs. new car. Used cars will cost less, so you'll have more options, making them a great choice if you have bad credit.
A new car is likely to experience more depreciation.
As we've mentioned, new vehicles are prone to significant depreciation, especially in the first year. Considering that, you're running a higher risk of ending up underwater on your auto loan, meaning you'll owe more than the vehicle is worth.
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.
NerdWallet suggests spending no more than 10% of your take-home pay on a car loan payment and no more than 20% for total car expenses — which also includes things like gas, insurance, repairs and maintenance.
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.