Buying A Used Car- Part 1: Budgeting

Posted Wednesday, Nov 07, 2018

buying used car

So, is it time for buying a used car? It may not be the time you would have chosen, but you have to. Or, maybe you're ready for something different. Or, maybe your teen is old enough for his/her own vehicle. In any case, how should you approach the car buying process? Obviously, there are tons of sites that will lead you through that process, but they all have several steps in common. Let’s look at those steps so you’ll be well prepared before you set off on your car shopping adventure. The steps for buying a used car are: Budgeting for the Car, Choosing a Body Style, Searching for Vehicles, Contacting the Seller, Test Driving the Automobile, and Closing the Deal. Since each of these steps is vastly important in relation to this large purchase, we’ll examine each one in its own respective article.

First, you need to budget for your vehicular purchase. If you don’t currently have a working budget, then you need to make one so you’ll know how much car you can afford. A lot of people make the mistake of looking at cars first (because that’s exciting), but there’s no point in making yourself drool over your dream car only to find it’s completely out of your range. So, start with a budget. When you're putting together your budget, include all of your expenses: housing, groceries, utilities, phone, internet, and cable; include any other recurring bills you may have. And, since you are entering car ownership, you may want to create a section in your budget for car repairs and preventive maintenance. Also, don't forget to include car insurance in your budget; if you don't currently have it, you'll need it for your new ride.

A sample monthly budget may look like this:

Net Income:                   $2000
Rent:                               $400
Groceries                        $500
Utilities                            $200
Phone                             $100
Internet/Cable                 $100
Medical Insurance           $150
Car Maintenance              $50
Car Insurance                 $200
Amount available            $300

Once you’ve established your monthly budget, you'll see exactly how much you have to use towards a car payment. It’s commonly recommended that your monthly car bill be no more than 20-25% of your monthly income; with a net income of $2000 as shown in the sample, 20-25% is $400-500. However, devoting less than that is sometimes better. Seeing how there are 4 weeks in most months, at the 25% level, you’re working a week each month just to make a car payment. But remember, the 20-25% is the maximum; depending on your bills, you may only be able to budget 15% towards a car, as illustrated in the sample budget above.

Now you can move to the next step: deciding what type of car (body style) you need. We'll look at that in the next article.

To read Part 2, click here: Buying a Used Car- Part 2: Choosing a Body Style

Photo courtesy of Reasonable Rides

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