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Step 4: How Much
Can You Afford? |
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This is the first and most important step. You must know how much you can spend
before you can determine what you can afford. Affordability is a multi-faceted
issue because the car buying process can consist of more than one transaction.
The key to simplifying the purchase process is to negotiate each step
separately:
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Dealing With Your Current Car: Trading-in your current car to a dealer or
selling it to a private party
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Obtaining a price of your new vehicle
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The new car buying process is greatly simplified when you discover the bottom
line vehicle price you can afford ahead of time. Here's an example of the kind
of details you'll need to know:
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1. |
"The trade-in value of the vehicle I currently own is Rs. 250000"
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2. |
"I owe Rs. 50000 on it"
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3. |
"I've got Rs. 00000 in savings I want to put down"
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4. |
"I want to pay under 6000 Rs per month for 60 months on a new car"
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This means the same as:
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"I can afford to buy a Rs. 500000 vehicle."
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If your current car is in extremely good condition and you have impeccable
service records, it may be well worth your while to sell it on your own. On the
other hand, if your car needs a lot of work, you may end up putting more money
into it than you can recover—so take a realistic look before you decide.
Your decision to stick to a budget will help provide peace-of-mind in the
car-buying process. With these principles in place, you should have a monthly
budget estimate in place. This is very easy to calculate. Add up all of your
fixed monthly expenses, such as your rent, phone bill, etc. Subtract that from
your net income. Then subtract your estimated extraneous expenses, such as
food, fuel, and entertainment, whatever. The result should be an amount of
money you have to play with.
From that, you need to remember that buying a car involves more than a down
payment and monthly payments. In your budget you will need to include
licensing, registration and other hidden costs, as well as insurance costs,
fuel and maintenance.
Once you have all of this worked out, you should have a ballpark figure of the
budgeted amount you can use for car payments. A good rule of thumb is roughly
20 to 25 percent of your net income can be used for a car payment. Once you
determine that figure, stay with it.
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