How Much Car Can You Afford?

Five Factors That Determine the Total Cost of Owning a Vehicle

Almost everyone wants to purchase the newest vehicle with the highest trim and is packed with all the attractive features; however, purchasing a new vehicle may not be budget-friendly. Our Jay Hodge Dodge Chrysler Jeep RAM team can help guide you through the car buying process, so you’ll know how much you can afford when purchasing your next vehicle. Knowing your budget can help you find a vehicle that meets all your needs while also staying within your price range.

The first step in purchasing a vehicle is realizing that the total cost of ownership doesn’t stop by the sticker price. Five factors impact the overall expense:

1. Maintenance and Repairs: Your vehicle will need regular inspections to ensure it continues functioning properly.
2. Depreciation: When a new vehicle leaves the dealership lot, its value will begin to decrease, which is also known as depreciation. Considering deprecation in the total cost of ownership is crucial, even though it doesn’t directly affect your immediate out-of-pocket expenses.
3. Fuel: Each vehicle has a different fuel efficiency estimate, so you need to consider that when choosing a vehicle and how much you’ll drive it.
4. Interest on Financing: Financing your vehicle means you’ll pay interest on that loan amount, and interest will build over the life of the loan.
5. Taxes and Fees: Additional expenses such as insurance premiums, sales tax, and registration fees are essential to consider when owning a vehicle.

All of these factors impact the total price of ownership, so understanding and preparing for them can help you be more financially responsible when purchasing a vehicle.

Determining Your Monthly Transportation Budget

It’s recommended by leading financial experts to spend no more than 10% to 15% of your monthly take-home pay on car payments, fuel, insurance, and maintenance. For example, if your monthly take-home pay is $5,000, then the spending amount ranges between $500 to $750 on all transportation-related costs. Planning for this range can help you avoid overspending on your vehicle and additional needs.

Calculating How Much Car You Can Afford

Once you’ve created a short list of vehicles you’re interested in, you’ll need to determine how much maintenance, fuel, and insurance will be for each vehicle. Then you’ll need to subtract that number from your monthly take-home amount, which will give you how much your monthly car payments will be.

According to the American Automobile Association, car owners set aside $600 to $700 yearly for vehicle maintenance, which is around $50 a month. To account for any unexpected repairs, it’s a good idea to plan for $75 a month instead.

To get a quote on insurance, reach out to your preferred insurance company; that way, you’ll know how much to budget for.

To calculate your monthly fuel cost, you’ll first need to determine how many miles you drive on average daily. Then you’ll multiply that number by 30 because there are usually 30 days in a month.

After you’ve calculated the total distance you drive, you’ll need to divide it by the miles per gallon on your vehicle, which will tell you how many gallons of gas your vehicle will need for the whole month.

Once you’ve determined how many gallons you’ll multiply by the current price per gallon, you should consider adding a dollar to the price per gallon to account for any fluctuations.

Formula: Monthly Fuel Cost = (Mile Per Day x 30 / MPG) x Price Per Gallon

Find an Affordable Car in Hugo, OK

Determining which vehicle works with your budget is important, so when you’re ready to find a budget-friendly vehicle, stop by the Jay Hodge Dodge Chrysler Jeep RAM. Our team can help you find all the vehicles on our lot that are within your budget. Our team is here to help you every step of the way, so if you have questions about auto financing, don’t hesitate to contact our team. Our dealership is conveniently located at 2505 East Jackson Street, Hugo, OK, 74743. We look forward to your visit.