how to figure out if you can afford a car payment?
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There's no perfect formula for how much you can afford, but our short answer is that your new-car payment should be no more than 15% of your monthly take-home pay. If you're leasing or buying used, it should be no more than 10%.
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A common rule of thumb for determining the price of a home you can afford is that your mortgage payment should be between 25 and 30 percent of your income. If your household earns $100,000, you could potentially afford a $250,000 – $300,000 home. In truth, 30 percent is too high for many people.
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That said, a good place to start for figuring out what you can afford is to use the 50/30/20 rule. This is a budgeting plan where you: Set aside 50% of your after-tax salary for 'needs', such as rent, food, bills and other unavoidable spending. 30% for fun spending - such as clothes, nights out or hobbies.
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['Clean up your credit report. ... ', 'Pay down your balance. ... ', 'Pay twice a month. ... ', 'Increase your credit limit. ... ', 'Open a new account. ... ', 'Negotiate outstanding balances. ... ', 'Become an authorized user. ... ', 'How to find cheaper car insurance in minutes.']
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['Buying a car should start with a budget. ... ', "If you're financing your purchase, the rule of thumb, according to money and car experts alike, is the 20/4/10 ratio. ... ", 'If you put any less down, you could be paying more than what the car is worth by the end of the year, it is also known as negative equity.']
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['Know How Much Home You Can Afford. ... ', 'Understand the Different Types of Mobile Homes. ... ', 'Find a Reputable Retailer. ... ', 'Look at Features. ... ', 'Consider Buying New or Used. ... ', "Don't Be Afraid to Negotiate. ... ", 'Know Your Options If You Have Bad Credit. ... ', 'Avoid Paying “Extras” to the Dealership.']
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The Bottom Line. It's difficult to accurately quantify the savings you can get by using a car dealership's internet department. But it's safe to say the price will nearly always be lower than the price you'll be quoted if you walk onto the car lot &mdash; assuming you can even get a definite price.
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['How Much Car Can You Afford?', 'Build a Target List of Used Vehicles.', 'Check Prices.', 'Locate Used Cars for Sale in Your Area.', 'Check the Vehicle History Report.', 'Contact the Seller.', 'Test-Drive the Car.', 'Have the Car Inspected.']
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['The downpayment on your car should be at least 20% of the purchase price.', 'Limit your car loans to 4 years or less.', 'Monthly payments should be less than 10-15% of your take-home pay (after taxes)', 'How much should I spend on a car?', 'The bottom line.']
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Financial experts answer this question by using a simple rule of thumb: Car buyers should spend no more than 10% of their 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.
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If the AAA numbers are right, and it costs an average of $706 per month to own a car. That's about half the average house payment. And if you have two cars costing you over $1,400 per month, that's probably pretty close to your house payment. If you live in a low-cost area, it might even be higher.
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Here's a quick way to calculate what you can afford to borrow and repay based on your income. When a lender looks at your mortgage application they generally assume about 30% of your gross income can be used to make loan repayments. Then they factor in your debt, assets and spending to forecast your borrowing power.
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['Be honest about your needs. ... ', 'Think about your budget and financing. ... ', 'Explore your options. ... ', 'Know your credit score. ... ', 'Apply for a loan. ... ', 'Take a test drive. ... ', 'Close the deal.']
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['Add up your total monthly income. ... ', 'Multiply it by 25% to get your maximum mortgage payment. ... ', 'Use our mortgage calculator to determine your budget. ... ', 'Factor in homeownership costs. ... ', 'Get Preapproved for a Mortgage.']
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You can know your car loan balance by simply contacting your lender or if you're tech-savvy you can simply log on to your lender's NetBanking or MobileBanking facility to know the car loan balance.
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To determine how much house you can afford, most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt -- that includes housing as well as things like student loans, car expenses, and credit card payments.
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['Set your budget.', 'Choose the right car.', 'Check reliability and ownership costs.', 'Test-drive the car.', 'Locate your car.', 'Find the right price.', 'Get dealer quotes.', 'Maximize trade-in value.']