How To Prepare Your Budget for Buying a Car in Louisville, KY

Buying a car is one of the largest financial commitments you’ll make, so you shouldn’t rush into it without careful planning. Planning a budget can seem daunting at first, but when you break it down, it’s not as challenging as you think. Follow our advice to prepare a realistic budget for your next car.

Research How Much the Car You Want Costs

Creating any car budget should always start with determining the kind of car you want. It’s easy to become dazzled by well-appointed luxury cars and stylish sports cars, but try to be realistic. Consider what you really need in a vehicle, such as enough seats for your household, good fuel economy, and advanced safety features. Then research your options. Read the reviews on car websites to see what the experts and other consumers liked and didn’t like about each vehicle.

Once you have a shortlist of vehicles that appeal to you, start pricing them. The manufacturer’s suggested retail price is the best way to determine how much new vehicles cost. Compare this value for similar cars from different brands to decide which model is the best value.

Cars depreciate rapidly in their first few years of life, so a used car can be a good option for people who care more about value than the latest tech features. Kelley Blue Book is a reputable guide showing how much you can expect to pay for older vehicles. Compare the new price and the used price for models you like to determine how much you might spend.

Consider Whether to Buy Outright or Get a Loan

When you buy a new or used car, you can pay for the car upfront or get financing and pay it off over time. Paying for a car upfront will save you money in the long run, as you won’t get charged interest. However, many Americans don’t have enough disposable income to buy a car outright.

Getting a car loan is the easiest option for most budgets. When you finance a car, experts recommend making a down payment of 20% of the car’s value. You’ll then pay off the remaining four-fifths of the car’s value over time. Most car loans in the United States range from three to five years. Longer-term loans are becoming more popular as people search for ways to lower their monthly expenses. However, consider whether you really want to be in debt and pay interest for any longer than five years.

Put your car value into a car loan calculator and vary the terms. This exercise will help you determine the best terms for a car loan you can afford.

Factor in Ongoing Expenses

There’s a lot more to keeping a car on the road than making your monthly payments. Once you’ve made sure you have enough money for the car itself, start calculating what it will cost to keep it on the road.

Gas

The cost of gas is the most obvious ongoing expense associated with owning a car. The amount you’ll spend on gas will vary depending on your car’s fuel economy, whether you drive to work and how far, and how social you are. People living in states where cities are more spread out tend to spend more on gas than people living in states where cities and facilities are close together. For example, people living in Maine spend an average of $1,343 on gas each year, compared to New Yorkers, who spend just $623 each year. Discover your state average in this Business Insider article and use it as a rough guide for your calculations.

Insurance

You can’t drive a car without insurance. Insurance costs vary, but the more comprehensive your coverage, the more you can expect to pay. However, without comprehensive coverage, an at-fault accident can be costly. New cars have advanced safety features that lower insurance premiums. Your age and location also impact the cost of your insurance. As a guide, the average American spends $1,416 on car insurance every year. Enter your details into an online insurance marketplace to get a more personalized estimate of the amount you can expect to pay.

Maintenance and Repairs

Maintenance and repair costs are another essential ongoing expense. If you’re buying a new car, your warranty should cover these costs and repairs for a few years, at least. Don’t disregard these expenses, as they should fit into your budget once the warranty runs out. If you’re buying used, you’ll foot your own maintenance and repair bills from the start. On average, expect to spend 8.94 cents for every mile you drive on maintenance and repair costs.

Don’t skip the maintenance, as neglecting oil changes, tires, and other servicing can cause bigger, more costly problems. Older cars are more affordable, but they also typically need more repairs, so budget a little more for the upkeep of your older vehicle.

License, Registration, and Taxes

There are also licenses, registration fees, and taxes to consider. Americans spend an average of $753 each year on these essential car expenses.

Put It All Together and Get Ready to Compromise

Once you put all your numbers together, it’s time to evaluate your choices. Budgeting is often a process. Consider whether you could afford your dream car, whether you’re buying it outright or making monthly payments, and the other expenses car ownership brings. Think about how your monthly car expenses will work with your other living costs such as groceries, rent, and entertainment. Leave yourself some money for savings, too, as unexpected bills often crop up.

If your car expenses are manageable, that’s great. You can start the search for your car. If they’re not, don’t give up hope. You’ll just need to tweak your numbers. Perhaps you should choose a cheaper new car or search for a quality used vehicle. Compromise and go through the numbers again. Repeat the process as many times as you need to until you’ve got a workable budget.

Once you’ve got your budget sorted, head to Oxmoor Ford Lincoln in Louisville. With a comprehensive range of new and used Ford and Lincoln vehicles, we know we’ll have a car you love that fits within your budget.