For most people, car ownership is an essential way of life — there is simply no other way to get from one place to another. If you find yourself dealing with extremely tough budgetary constraints, however, you may begin to wonder if you can truly afford a car or should even buy one in the first place. The good news is that there are ways of cutting budgetary expenses, lowering the monthly amount of car payments, and getting great deals on financing and car ownership.
Calculate Your Budget
First, you need to calculate just how much of your budget is available to you for car payments and ownership costs. As a general rule, economists urge people to keep their debts to within 37% of their gross income every month. These estimates include things like rent payments and mortgages, as well as student loans and car payments. This is the first step to figuring out just how much money can be devoted to purchasing a car.
Second, you must determine how often you will be driving the car and for how long. Those same economists recommend keeping transportation expenses to within 10% of your gross monthly income when constructing a budget. That includes maintenance, fuel, and car payments — so you might want to investigate a hybrid model if you’re trying to save on the cost of gas at the pump.
Existing Car Owners: Refinance
It’s much like owning a home and getting a better mortgage rate: car owners who pay a monthly car payment to a bank or other lending institution can take advantage of interest rates that have lowered since they initially secured their car loan. Lower interest rates will result in lower monthly payments, and that can free up the budget for other things. Alternatively, it means you could keep your payment at the same higher amount and effectively pay your vehicle off sooner.
If you’re considering this option, be sure to speak with a banker at your lending institution and discuss things like interest rates, the application process for a refinanced loan, and whether you qualify with your existing debts, credit scores, and payment history.
Cutting Items from an Existing Budget
Creating a budget and understanding the room needed for car payments is one thing, and refinancing a car loan is another. However, there’s no need to take such drastic steps if you find yourself short on cash but in dire need of an automobile. Many budgets are needlessly high, as people pay for things they don’t use or spend small amounts of money mindlessly without realizing that those types of things add up.
Consider cutting discretionary expenses from your budget: cancel your cable TV service in favor of over-the-air reception, or consider dining out less and cooking your own meals more often. If you already own a car, a great way to reduce expenses and open up more room in your financing budget is to begin carpooling with friends in order to save on fuel.
A car can almost always fit into even a tight budget. It may require compromises on discretionary spending or a refinancing offer from a local bank, but those are minor steps when compared with the major requirement of automotive transportation.
Jessica Bosari writes about money saving and automotive topics for CarInsuranceQuotesComparison.com. The site helps consumers save money with a handy car insurance quotes tool.