Budget More than Just Monthly Car Payments

You have your cash down payment saved. You have a pretty good used car for trade-in,which you know will add to your total down payment, and you are finally ready to go car shopping.

When you find a vehicle in piques your interest, you look it over carefully. You test drive it and examine everything you can think of. When everything is satisfactory, you head to the sales office to submit your car finance application.

Did you consider how long you would like to pay for your car?

A total loan payment is drastically influenced by the term of the loan—how long it will be outstanding. Your monthly payments differ from a two-year, a three-year, or even a five-year loan. While your monthly payments are lower in longer term loans, know that the amount of interest you will pay over the life of the loan will increase.

When considering paying more per month for a shorter time period, however, factor in the amount of your insurance payment, periodic maintenance costs and petrol costs.

You are far better off agreeing to a longer loan life with lower payments per month than you are overextending your monthly payment affordability. Accidents happen. Allow for accrual and withholding your insurance deductible. Allow funds availability in your car budget for oil changes, new tires, and tune-ups. Allow a little extra per month toward emergency car repairs.

If you can pay extra per month on top of those saving requirements, do so and save interest costs when possible.