Posted on September - 21 - 2010
How to Squeeze that Car into Your Budget
GuestPost:billeater.com
If you’re tired of constantly worrying about making that monthly car payment, it may be time to do something about it. It’s important to look at how much you’re paying for your car in relation to your income and find a way to make it fit into that tight budget.
The first thing you need to do is look at your current car loan. Can you afford it? It could be that when you bought the car, you had poor credit. Maybe you’ve had some bad luck and your income is lower than it was then. It’s is important to look at your income, spending and overall budget to figure out how much you can afford every month.
If you’re like most people, your bills fluctuate from month to month, and it is next to impossible to predict unexpected costs that may come up between now and the end of your loan payments. For this reason, financial advisors often recommend an estimate to guide you as to how much you should spend in certain areas of your finances.
In an ideal world, between 6 – 20% of your take home salary should go towards all of your transportation expenses. These expenses include your car payment, maintenance, gas, and auto insurance. While financial experts want you to keep it around 10%, few people are able to meet this goal. For young adults, higher insurance payments combined with low salaries make it nearly impossible to keep car expenses at 10%. Those with families may find the need for a larger, more expensive car to transport the entire clan, making that goal difficult as well.
So, while you are aiming for 10%, you should be careful to keep it under 20%. To try to meet this goal, shop around for the best rates you can find on an automobile loan. How much are you paying in interest? Have you even checked to see if there are better rates around? You can ask your bank, see if you have a credit card with a low interest rate that will cover the loan balance, or try a service that ensures banks know you are shopping around, thereby increasing your chance of getting a competitive rate.
Services like the MoneyAisle.com’s auto loan auction can connect you with a loan that (hopefully) fits your budget. They even have a “name your payment” option that lets you strike while the rate is right, helping you shoehorn that car payment into 20% of your take home pay.
Just how much can you save on a car refinance? Well, it depends on a few things, like the amount you own on your current car, the interest rate you pay now and the interest rate you get after refinancing. Fees for refinancing need to be taken into consideration as well.
Many have reported saving more than $100 per month. One man saved $350 a month. That could go a long way towards easing your financial stress.
billeater.com is an online information source, with a goal of collecting money saving tips in one place to share with others.
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