To help you determine how much to spend on a car, you need to think about factors. When you think about leather interiors, rearview cameras, and top-notch automatic emergency braking, you want to get the best car out there. However, sometimes what we want isn’t always what’s ideal for us. If you’re considering the amount to spend on a vehicle and what your options are when you want to refinance car loan, we’re here for you. These financial priorities are essential to help you select the best option for you. Keep reading to learn the factors that’ll make the decision easier for you.

Consider Your Income

When you want to determine how much you can spend on a car, you should consider your income. Your take-home salary is what’s important in this consideration; what you earn after tax. You shouldn’t spend more than 15% of your income on transportation. This spending includes car payment, fuel, insurance, and even when you need to refinance a loan. That means if you earn $3000, your budget for transportation should be $300 – $450.

Previous Debts

Another thing you should consider that will help you determine how much you need to spend on a car is your previous debt. If you possess medical bills, student loans, or even credit card balances to think about, it might eat into your income. Your debt will cut down your car budget, so you should consider it.

Financing

Another factor you need to take note of is how you want to finance your loan. You can choose to go with a loan which is a popular option. All you need to do is apply for a loan, and lenders will determine if you’re eligible. The interest rate will be set if you are, and you can set out a repayment plan. You can even choose to refinance car loan when necessary to cut down on high-interest rates building up.

Taxes and Several Fees

You also need to note that buying a car is only the first step you need to take in owning a car. There are some fees and taxes you have to also take note of. Sales taxes are essential in some states. However, registration, tag, and title fees are vital every time you purchase a car. You will also need to consider the documentation fee in some states. Sometimes, these fees can run up to $1000 – $2000, depending on the location.

Determining Your Budget

With the information presented above, you can create a budget for how much you should spend on a car. If your salary is $3000, your budget is $450 on transportation. If you subtract maintenance and insurance fees from the amount, you’ll have at least $350 left for monthly car payments. Next, you need to consider existing debt, and your credit score will determine how much you can get. If you qualify for a 60-month loan term with a 5% interest rate, you should be able to afford a $20,000 car.