According to the US Bureau of Labor Statistics, in 2017, the average household allotted 16% of their annual budget to transportation. This is equivalent to almost $ 9,576. As you become more financially independent, you may be looking to invest in different properties. After purchasing a new house and you are already settled in, chances are that you’ll move on to your next purchase – a new car.
However, it is always important to consider your financial capability before making a big-ticket purchase, such as a new vehicle. It also doesn’t end there as you will need all sorts of insurance like comprehensive, collision coverage, and personal injury protection.
So, are you ready to shop for your next ride? Check out these three smart ways to finance a vehicle.
1. Start a Car Fund & Pay in Cash
Saving up portions of your income for a car fund is a good start. Once you have the cash, you can pay a unit in full. Through this payment option, you can avail of promotional packages and discounts that are not offered in other methods.
A downside is that you can’t buy the vehicle if you don’t have enough money. As an option, you can ask help from financial institutions to pay the car in cash. Through this, you can get the incentives that go with it while you pay the loan within a given timeframe. And of course, you must also consider and think if you are capable of repaying what you will owe from financial institutions.
2. Assess your Income and Opt for Dealership Financing
With dealership financing, you and your dealer will both agree on an installment plan that you’ll pay within a definite time frame. As a guide, your monthly car payment should not exceed 20% of your disposable income. That is one-fifth of what is left after paying all your debt and living expenses. You can choose from a variety of cars in a different price range to see what fits in your budget if you can’t afford it don’t buy it option out for something that you are confident that you can pay.
3. Consider Car Leasing to Save up for the Payment
If you have limited funds, you can consider renting a car or car leasing. Through this, you can pay a certain amount of money for using a particular vehicle in a specified timeframe. This option is suitable for those who need a car for only a short amount of time. However, this means that you will be charged with penalties for any damage and pay for exceeded mileage.
With a proper strategy and a solid investment, doing your research will not only help you save wisely but also save money in the long run. Just always remember that before you go and buy something you have to consider a lot of things financially first this way you’ll avoid sinking to debts that you might not be able to pay. Follow these tips on how to finance a new vehicle the right way.