|
Top 5 Budgeting Tips For Your New Car
Author David Schneider | May 23,2007
|
When it comes to taking a rational approach to car payments, many of us fail miserably. This is no more than an honest view of the situation, one that anyone who assesses the current status of the auto financing industry might reach. But the news is not bad for everyone - only for those willfully irresponsible individuals who treat auto ownership with less respect than it deserves. Finding and maintaining a solid auto policy is an integral part of your overall budget, so it is not something to be undertaken without due care. Fortunately, there are a few simple things to keep in mind that will collectively go a long way toward keeping your automobile costs within manageable parameters.
The first thing you need to understand is the value of qualifying, and the different ways it can come into play. Stated in the simplest terms, qualifying for a loan means that you have satisfied the lender's concerns about your financial means (and inclination) to repaying the amount in full and on time. This will be the bedrock foundation of any auto financing plan you adopt.
Secondly, you'll want to acquaint yourself with the two primary methods used for qualifying. Many lenders rely on an applicant's credit report as the primary factor, while others are more likely to use an applicant's debt-to-income ratio. You should be aware that the two methods can produce different results, and therefore your ultimate outcome may vary depending on how you are qualified. The bottom line here will be not simply whether you get the car loan, but what the terms will be.
Once you've qualified, there's a big pitfall you'll need to avoid: overbuying. Many people let themselves get so swept up in the euphoric relief of qualifying for a sizable loan that they go way overboard in making their purchase decision. In fact, these folks sometimes throw their previous budgetary limits out the window and opt for vehicles that are clearly beyond their range, simply based upon getting qualified. Don't become one of them!
Once you've decided upon a vehicle that truly matches your current financial status, it's time to step back and take a look at the bigger picture. There are many costs associated with owning a car that go beyond your monthly payments with the lender. These include gas, insurance premiums and routine maintenance expenses. While such costs do not appear in either your credit report or your debt-to-income ratio, they will certainly have a major impact on your monthly bottom line.
When adding up all these costs, the prospect of making payments every 30 days can become a daunting one. Thus, some people like to consider the option of cashing out available funds (whether they be in the form of savings or securities) and paying for the car entirely out-of-pocket. While this option is almost always less expensive than a financing approach, it is obviously not feasible to everyone. But the idea of erasing monthly payments is often sufficient to motivate people to put their money in the investment of a new (or used) car. |
|
|
Print
E-mail
Del.icio.us
Digg
