How To Figure Out Your New Car Budget

Published on September 27th, 2017

Buying a new or used car is exciting and stressful, as very few of us can afford to buy one outright and in full. But that’s why auto loans in Elmhurst and surrounding areas exist, to give you the means necessary to own the car of your dreams! Figuring out what exactly you can afford can be tricky. You have to think about the down payment, loans over time, interest, income, and your other monthly expenses. At Leyden Credit Union we counsel our members on this very topic. We work with our members to help them figure out what kinds of auto loans in Elmhurst they can afford. Here are some general principles to think about when calculating your car affordability.

At Least 20 Percent Down

According to Edmunds, a car loses 9 percent of its value as soon as it’s driven off the lot. By the end of the year, the car has lost 19 percent of its value. This means you should put at least 20 percent down so you don’t owe more than the car is worth immediately after purchasing it.  

Keep Your Term As Short As Possible

The longer the term of your auto loans in Elmhurst, the more interest you will pay. By the end of your loan term, your car will have significantly lost its value. Try to put as much down as possible and continue to make the largest monthly payments you can afford.  

No More Than 10 Percent of Gross Income

Most things aren’t worth having if you have to go broke to do so, and that remains true for cars. Your total car payment, which includes interest, principle, and insurance, should not exceed 10 percent of your gross income. You want to be able to afford other things or have money set aside in case of emergencies.  

Following these principles is a good basic guideline to finding out how much you can afford to pay for a car. However, talking to a financial professional will give you greater insight into your car affordability. Contact Leyden Credit Union today to speak with a Financial Services Representative about the auto loans in Elmhurst we offer!  

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