How Do I Know How Much My Car Is Worth – As a first-time car buyer, how much can you afford and what is a responsible price target? Responsible questions. Read on to learn what to prioritize when it comes time to find a dealer, negotiate, and pay for a new car.
Budgets are important, especially when buying a car. As with all financial matters, there is debate over how much you should spend on your next car. According to CNW Research, nearly 40 percent of consumers try to stay within 15 percent of their budget, and nearly half want to stay within just 5 percent of their budget when they leave the dealership. You should contact a financial planner to determine which price is right for you; you don’t want to be “car poor” because you won’t be able to buy anything for a month after you make the car payment.
How Do I Know How Much My Car Is Worth
For most shoppers, the budget comes home in the form of a monthly car payment. According to Experian Automotive, about 85 percent of new car buyers today finance or lease their car; most used car buyers do the same.
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So how does that monthly payment translate into a new car budget, and how much should it be? Get started with some of our financial tips below.
Estimating how big your car payment should be depends on many factors. How much money is coming in and how much of it is going toward rent, mortgage payments, and/or student loan debt? These are relatively entrenched costs and are more difficult to change than, for example, deciding to eat out less at restaurants or giving up paying for cable TV.
Experts’ estimates are wide. Greg McBride, senior vice president and chief financial analyst at Bankrate.com, recommends that a car payment should be no more than 15 percent of your monthly payment before taxes. This means that if you earn $50,000 a year, your monthly car payment could be as high as $625.
But for most of us, it should be lower. The 15 percent cap only applies “if you have no debt other than the mortgage,” McBride cautioned. Most first-time buyers can’t say that, so be smart about how much you put aside.
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You’ll also have gas and insurance to pay. Don’t be surprised how tolls and parking costs add up, or remember to keep cash on hand to finance regular maintenance and repairs. All these costs have led some experts to recommend even lower budget limits for your car purchase. Interest.com managing editor Mike Sante says you shouldn’t spend more than 10 percent of your pretax income on car payments and the total cost of car insurance, and the College Board recommends 15 percent of take-home pay.
Good. Now, pull the automatic affordability calculator and fill in the monthly payment you decide on. If you have a car you plan to trade in or sell, estimate its value using a calculator and fill it in with your estimated down payment. McBride recommends putting down at least 10 percent if you’re financing a new car, and 20 percent for a used car. Don’t assume your trade-in will be enough as a down payment.
Enter the combined percentage for sales tax, which you can usually find at your state’s Department of Motor Vehicles, Department of Revenue, or other state government website. (Your local car dealer should be able to tell you this rate if you call.)
Now that you’re not paying cash, you’re ready to think about your car loan interest rates and terms. For the sake of this exercise, enter a five-year loan (60 months) with a prevailing interest rate of about 3 percent as of February 2015, according to Bankrate.com.
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Enter all the numbers and you should have a pre-tax number based on how much car payment you can afford. Find out more about the negotiation process and our tips, and if you’ve done your homework with our affordable car price calculator, you can now focus on making sure you find a car that’s worth the price. The monthly car payments will work themselves out.
“The bigger picture is how much you’re paying for the car,” McBride said. “Focus on getting the best possible price for the car, limiting other out-of-pocket costs and extra costs. If you do all that, the monthly payment will Follow @ — you’ll have a manageable monthly payment.”
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To calculate the cost for a car, click the Calculate Single Car radio button, fill in the car cost information in the column on the left, and then click the Calculate Car Price button.
To compare two cars, click the “Dual Car Calculation” radio button, fill in the information in both columns, and then click the “Calculate Car Price” button. If both cars have similar data, you can populate the first column with the “Calculate Single Car” radio button selected, and then click the “Transfer entries from car #1 to car #2” button to populate the right column. (Make sure you go to ‘Double Car Counting’). Then change any cells that are different before calculating.
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Cars are one of your top 5 expenses and can have a significant impact on your wealth plan, so be careful. In this wealth strategy course, I teach how to own free cars for life.
Similarly, your car costs can vary dramatically from car to car, depending on whether you buy used or new, due maintenance and more.
Fortunately, this car cost calculator makes it easy to calculate the true cost of car ownership and even compare costs between different vehicles by applying all relevant factors including tax, license, warranty, depreciation, finance, insurance, fuel, maintenance and repair costs.
Below is more information to help you use this car value calculator correctly, so you can lower your car ownership costs.
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Buying a car is probably one of the biggest purchases you’ll ever make – second only to a house.
Your true cost includes depreciation, insurance, maintenance, fuel, and more. includes. In short, there are many factors to consider, including the monthly payment.
The high cost of car ownership is especially important because it affects your ability to use your money to do other things, such as go on vacation, retire, or pay off debt. Not only that, but different cars can have dramatically different costs compared to another car – sometimes two or three times more per mile to drive.
That’s why it’s important to use a Car Cost Calculator to calculate everything. This will show the true impact of your car expenses on your budget and help you find the best deal that fits what you can really afford.
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Like any other retail purchase, you’ll pay sales tax when you buy a car (assuming you live in a state with a sales tax). Of course, this can cost a lot of extra money if you don’t finance the car.
Tip: You can help offset this cost with a tax credit by purchasing certain fuel-efficient vehicles, such as electric cars and hybrids.
The annual license fee is your regular payment for using your vehicle on public roads. You must pay this fee to drive legally.
Tip: To avoid tickets, make sure you follow all laws and pay the appropriate fees to governing bodies.
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The cost of an extended warranty is an extra charge to your car dealer (or manufacturer) to protect yourself in the event of unexpected large costs due to mechanical failure.
Depreciation costs can be the biggest cost of your car. Depreciation is simply the cost of wear and tear that reduces the value of your car after a few years. The depreciation rate is different for each car. On average, a car depreciates by about 65 percent at the end of five years. It is important to know the depreciation cost of your car because it is an important factor if you want to sell your car after a few years. Resale value is calculated by deducting depreciation from the original purchase price.
Fuel cost will vary depending on mpg (miles/gallon or equivalent) and fuel price. One of the main costs of owning a fuel is the cost of fuel
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