For people who are in the market to purchase a vehicle, thoughts concerning the actual amount the car will take out of the monthly budget are likely to come up. While there isn't a set amount of money that will be sufficient for this, there are some guidelines you can follow to ensure that the actual cost of owning a vehicle won't completely wreck your budget.
Financing
When you are purchasing a vehicle, the amount you will have to budget for that vehicle can fluctuate according to your credit score because the interest rate you pay on your car loan is affected by your credit rating. According to DriversEd.com, a person with a good credit rating can expect to pay around 4 percent in interest, while a person with bad credit can expect to pay around 21 percent in interest. It goes on to state that an applicant with bad credit would pay $464 as the monthly payment on a $15,000 car and a person with good credit would pay $339. That being said, when you start to prepare your budget for a vehicle purchase, consider taking the time to improve your credit score, if needed, so you can get the most for your money. Your credit score also may determine the down payment you will have to put down to finance your vehicle. According to MorningCall.com, the total of all your car payments should be no more than 15 percent of monthly take-home pay. If you don't have good credit, you may have to pay cash for your vehicle. You can save the money by placing the amount you would make for a car payment into a savings account. The advantage to this method is that you can often get a discount by paying cash for a car.
Immediate Costs
With the exception of buyers who are able to get sales tax, licensing fees and registration costs financed, you will have to ensure that you have money available to pay these items when you drive your car off the lot. In some states, such as Arkansas, you will receive drive-off tags that give you 30 days to register your vehicle. Even if you live in a state that does this, you should be realistic about your ability to come up with the funds within the allotted time. Many states have severe penalties for not tagging a car within the specified time.
Long-Term Costs
Your car-payment budget should also include other expenses. Include insurance costs, which will be higher for more expensive vehicles, younger drivers and people with less than stellar driving records. Include maintenance costs, such as regular oil changes, tire rotation and balancing, and windshield wiper changes. Money Under 30 suggests paying yourself a car-maintenance premium every month and placing the funds into a high-yield savings account so the money gains interest and you have the peace of mind knowing that you can pay for maintenance on your vehicle.
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