4 Tips for Setting Your New Car Budget

Calculator with "MONEY" displayed on the screen.

Image via GotCredit on Flickr | Licensed by CC BY 2.0

As the pace of life picks up, it’s more important than ever that we have a car. Before you visit a dealership, though, it’s essential to set a budget for this big purchase.

  1. Don’t Forget About Your Trade-In

Saving money toward your down payment helps reduce the cost of the vehicle. It’s not the only way to lower the price. Don’t forget about your trade-in when you’re thinking about how much you can put down up front. When you’re considering your trade-in value, think about the age and condition of your car. If you keep your vehicle in good shape, you have a better chance of getting a good offer from the dealer.

Make sure you keep your vehicle clean as well. The less work the dealer has to do once they buys it from you, the higher your price might be. It’s also important to understand that the age of your vehicle impacts its value. The newer your car is, the better trade-in value it has.

  1. Figuring Out the Total Cost the Day You Buy

As you plan for your new vehicle, prepare for the day you buy your car. Not only do you need to bring your down payment with you, but you need to have enough to cover the title and documentation. Depending on what dealership you deal with, you may also have to pay other types of processing fees. You also need to pay taxes on your new vehicle.

  1. How Do the Monthly Payments Fit Into Your Overall Budget?

As you crunch the numbers for your car, don’t forget about the rest of your monthly budget. Make sure you are not going to go car broke. Total up the amount you already spend on monthly expenses, add in any changes to insurance, plus the cost of fuel. Use this number as a basis for planning your new car budget.

Write down the number that is the maximum you can safely spend without having an issue with the rest of your money. Make sure you take this number and a trusted person with you to the dealer. Choose someone who can help you rethink any decisions that may impact your budget’s bottom line.

  1. There Are Other Expenses Involved in Owning a Car

When you’re budgeting for your new car, take into account the other expenses involved in owning a car. If this is your first vehicle, these might surprise you. Beyond the cost of changing the documentation and processing the car the day you buy it, there are recurring expenses to factor into your budget.

Keep track of the fluctuating cost of gas in your town, and don’t forget to plan for your car insurance. Depending on the type of vehicle you purchase, it may or may not increase with the new car. Getting routine maintenance is essential to keeping your car on the road.

Keep these tips in mind as you research your next vehicle online and at a dealership. Stay firm and stay focused through the process. A firm budget helps you ensure that you won’t have buyer’s remorse once you get your vehicle home.