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Financial Planning for a New (or Used) Car

Whether you’re in the market for a new or used car, whether this is your first, second or third vehicle, or if you think you already know the ins and outs of auto buying, it never hurts to take some time to plan out your purchase.

Budget, Budget, Budget
You might see yourself in a sporty new convertible, but your bank account may have a different idea. Make sure you and your finances are in agreement before plopping down a mountain of cash on a car you can’t afford.

Start off by figuring out how much you can afford to spend on a car payment each month. Calculate your take-home income, and then subtract all of your monthly bills—rent, utilities, student loans, etc. You may have to estimate for food and entertainment. Whatever you have left is what you have to work with. Be sure to leave yourself a little bit extra—you don’t want your new car to break the bank.

Calculate Your Costs
Not many people realize that the price they pay at the dealership is just the beginning. Even excluding depreciation, which Consumer Reports says constitutes roughly 46 percent of the total cost of ownership over the first five years, you’ve still got insurance, gas, maintenance and interest on your car loan. This can really add up.

Take fuel costs, for example. A fuel-efficient hybrid might be a few thousand dollars more than an SUV, but take a moment to do some calculations. At 12,000 miles per year, which Consumer Reports says is about average for most drivers, a car that gets 20 miles to the gallon will cost about $10,500 to fill up over five years (assuming $3.50 per gallon). Meanwhile, a car that gets 30 miles to the gallon is going to cost just $7,000 over the same period.

Get A Good Rate
When you go to get a car loan from your credit union, there are a few things you can do to help make sure you get the best rate. The amount of interest you wind up paying on your auto loan is based on your credit report, so before you look at a car, take a look at your credit. If you’ve got a less-than-perfect record, take some time to fix up your score—when you see how much you can save, you’ll be glad you did!

If you are looking for a new or used car, Mountain America has some of the best rates available. For more details, or to apply for an auto loan, visit Mountain America’s website, www.macu.com.

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This article is sponsored by Mountain America Credit Union.

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