How do I know which used car loan I can afford?
When shopping for a used car in Eugene, a common question to ask yourself is, “How do I know which used car loan I can afford?” It’s easy to let your eyes get big and see something that you love that’s really nice, but also really expensive and way out of your price range. There’s a simple way to keep yourself in check and stay away from the overpriced unicorns.
A safe method is to follow the 20/4/10 rule. This rule helps you to keep a realistic plan in mind when saving and shopping for your next car.
- Save for a 20% down payment
- Apply and budget for a 4-year car loan
- Budget for car loan payment and operating costs at 10% of your monthly net income
20% – Down Payment
Save 20 percent of the total cost of your next car, truck, or SUV for a down payment. Sometimes buying a new form of transportation is an emergency, so it’s tough to dig that much change out of the couch cushions in a pinch. However, if you’ve been planning on buying a car for a while, set 20 percent of the cost as a goal for your down payment. This not only helps reduce the cost of the vehicle by 20 percent but helps you to understand the true value of the vehicle you’re buying. So, if you want to buy a used Toyota 4Runner in Eugene that’s priced around $25,000, set $5,000 as your down payment goal.
4 – Years for Loan
Aim for a car that’s priced to fit your monthly budget with a car loan that has a 48-month term. It’s easy to spread the used car loan out over a longer term to lower the cost of the monthly payment. However, this only increases the amount of money you’ll pay in interest and skyrocket the end amount that you pay for the car. With a four-year loan as the ideal term for your Eugene auto loan, be sure to keep your monthly payment within the parameters you’ve set. You can fill out our simple online finance application to get started on the financing process.
10% – Monthly Payment and Vehicle Operating Costs
An easy way to budget your monthly car payment is to try to keep your monthly payment and operating costs under 10 percent of your monthly net income. Don’t budget this off your gross income, because you’ll end up “car poor,” which is when your car payment is sucking up all your monthly funds and you’ll have a hard time meeting the other financial demands in your life. For example, if you bring home $3,000 per month after taxes, you can afford a car with a monthly payment and operating cost of $300. Our helpful car loan calculator can help you get started by estimating your future monthly payment.
It’s important remember that there are other costs that come with owning and operating a car besides the monthly payment. You need to remember that you’ll have to insure your car, put gas in it, and change the oil every few months. Your car shouldn’t drain your savings account or consume your paycheck just to put gas in it. Keep in mind that high-end sports cars don’t run on fuel with an 89 octane rating or simple 10W-40 oil. If you’re in the market for a something like a used Cadillac Escalade, you’re going to need to fit premium fuel and synthetic oil in your monthly budget.
Thanks to the friendly and knowledgeable team at Kendall Budget Sales, you can easily find a used car in Eugene that will fit within your budget. Our team in our Finance Center is here to work with you no matter your credit history. Our financial team specializes in bad credit, no credit, and bankruptcy car loans, so we’re here to help you get the used car financing that you need.