Car ownership requires much more than fun. A price tag hangs upon the freedom of the drive. You can avoid stress if you take steps to leverage your finances prior to purchasing the car. Too many people focus on the amount of the loan, down payment and cost. Even if the monthly payment is low, you need to work it into your other expenses. Here, we’ll provide some tips to follow so you can enjoy your ride well into the future.
1. Existing Monthly Budget
Before you take a look at your monthly budget, review your dynamic. Are you living with a roommate, partner or spouse that handles half the house expenses? If you’re paying for your car on your own, this is still important to know. If they make less money or if the unthinkable happens and they lose their job, will you face a repossession? The whole house must be stable in order to take on a car payment, car insurance, regular maintenance and inevitable repairs.
2. Your Employment
If you are the sole earner in your household, you must consider your budget more than if you had a financial helper. Consider your employment. Are you a seasonal worker that’s burning the candle at both ends to try to save for a car? Remember that you’ll need at least 6 months’ expenses plus car costs when you stop working. Do you have permanent employment with an unstable schedule?
Many people don’t have a 9-5 job that guarantees them a set amount each week. That’s tough to write a budget for, and you may end up having to pay a larger down payment to take the car off the lot. This is another scenario to consider having stiff savings.
3. What Not To Depend On
When budgeting for a car and associated expenses, you must learn to view your salary differently. Some people earn bonuses weekly, monthly, yearly or on all of those occasions. While bonuses are the icing on the cake, your expenses must be paid with the cake only. This means you do not include bonuses of any kind into your regular expenses no matter how regular your bonuses seem to come.
Even if you’re in a large corporation and you feel they’re doing well, this doesn’t mean a bonus won’t disappear. Rest assured it will when you need it most. It’s part of life’s sense of humour to make us think. You may also be a stellar salesperson but everyone has emergencies, sick days and times where for whatever reason you’re off your A-game. So, plan smart on your base income.
The next thing to not rely on our promotions or any other promise of a brighter future. Even if you work for yourself, there are no guarantees in life. Only count it if you can see it. This is not pessimistic or negative but a word to the wise so you can keep on trucking, or driving!
4. Your Credit:
Yep, this is one that can hurt. You’ll either have no credit or bad credit. We know that good credit gets you those zero interest or no-down-payment deals, but make one slip in life and you can kiss that one goodbye.
There’s good news though. Most people don’t have great credit. How’s that good news you ask? It’s good because companies want to sell you stuff so, more credit-building instruments are offered now than ever before.
So what do you do? Pull your free yearly credit report from all three Credit Bureaus. Look at what you owe, how old your debt it and what the Fico score says. Try to pay down as much as you can on time. Work out payment plans with old debtors and get yourself out of collections. Most collection agencies will settle your debt for a lesser amount. Make sure they strike it from your record and keep pestering them until they do.
You can also apply for a secured credit card. Your credit will be to the amount of your deposit. Virtually no one is turned down because they have your money in case you default. However, the APR interest will be 24 to 29% so don’t overspend. Make small purchases and pay on time. This will help to raise your score.
Your Car Loan Score:
Lastly, car dealers have a dirty secret they don’t want you to know about. Your Fico can be spectacular but if you fit into any of the below circumstances, they’ll know and you’ll either be turned down or pay through your nose somehow. Either way, they’ll protect themselves from issues.
What car dealerships look for:
1. Signs you may file bankruptcy soon.
2. Repossessions and past late car loan payments
3. A very short credit history, even if it’s perfect.
4. Signals that you’ve been through a credit repair service in the past
5. Recent bankruptcy