By Paula Dias
So, it is time to replace your car. The first stop should be the dealership and then researching autos on the Internet, right? Not so fast. Before researching the next car you want to buy, it is excellent practice to determine how you will pay for it. Whether you are buying new or used, the fact is, purchasing a car can be a significant expense. The median price of a new car is now over $30,000, and while used cars vary greatly in price, it is clear that planning ahead for financing is a very wise move.
Ideally, we would prefer to buy without needing to finance. The reality is that most of us cannot do that. If you are going to finance your next car, the first thing to determine is the amount of any down payment and how much you can afford to pay monthly. If you can put a little more down, you will have smaller monthly payments, all things being equal.
Another consideration is how long you want to be making car payments. While it is more affordable to make smaller payments for a longer time, you will end up paying more interest in the long run. When determining what you can afford monthly, it is very important to calculate only your guaranteed income every month. It is tempting to include overtime you