How to Budget Correctly When Shopping for Used Cars

March 27th, 2019 by

A woman holds the keys to her new used car

When shopping for used cars, you may be experiencing stress trying to figure out how much you have in your budget and whether or not you can find a reliable used vehicle that is perfect for your specific driving needs. There are so many possibilities for finding the used car of your dreams. You may be hoping to find one of the newer used cars that come with all the options and have the best in safety features and offer a great infotainment system. However, you need to have a reality check to ensure that you are going to stay within your predetermined budget, so you don’t overextend yourself and buy one of the used cars that does not fit into your current financial situation.

Now, before you get depressed and think that all is lost because you’ll be stuck driving a much older model at the basic trim level—let’s face the facts and figure out how to budget correctly when shopping for used cars.

Budget… What’s that?

The best plan when determining how much to allocate for automobile expenses is to budget approximately 10 – 15 percent of your monthly income for this financial expense. Remember to be smart when starting the budgeting process. You need to put aside all the dreams of great features and focus on the money you can safely spend without exceeding the budget.

Now, you may never have even created a budget for your monthly expenses. If that’s the case, you should strongly consider creating one before starting the used cars shopping process. There are several factors you need to identify first:

  • Amount of Take-Home Pay Each Month
  • Bills and Other Monthly Expenses
  • Amount Set Aside for Savings
  • Miscellaneous Monthly Expenses

If you are already paying a monthly payment for an auto loan, and if your monthly income hasn’t changed, it’s best to budget for the same amount for another vehicle. If you have no auto loan right now, calculate what 10 – 15 percent of your monthly income is, and estimate that amount for what you can spend on the new payment.

You can use a car payment calculator like this one found on Nerd Wallet to help estimate what the monthly payment will be for the listed car price. You’ll need to input information like the listed car price, down payment, interest rate, credit score, and the number of months for the loan. The suggested months are 36 for used cars and 60 for new cars.

Estimating the Overall Cost

Stacks of coins in front of a piggy bank to budget for used cars

Now that you are secure in your budget, you can begin the used cars shopping experience. However, while reviewing used cars online, take the time to estimate the overall cost for the vehicle before you visit the dealership. There are more costs involved than what is listed on the sticker price. Consider the following factors when estimating the final cost for the vehicle:

  • List Price – The base price for the car will be listed on the window. Sometimes you can negotiate a lower base price. However, when estimating the overall price you’ll pay for the vehicle, use the base price figure.
  • Extra Fees – There are additional fees to consider such as documentation fees, title fee, or destination charges if you are having a vehicle delivered from an online dealership.
  • Sales Taxes – The amount you’ll pay for sales tax depends on which state you live in.
  • Interest – Interest rates change over time so you can check websites like Bankrate to find the current interest rates for a 36-month used car loan. Remember, that your credit score affects the interest rate. Poor credit ratings can mean higher rates.
  • Insurance Costs – A variety of factors affect how much your insurance costs will be, such as make, model, and year of the vehicle, as well as location. Your driving track record affects your rate. You can check out a website like TheZebrato find listings for the average insurance rates for the top providers like Allstate, Liberty Mutual, and State Farm.
  • Fuel Costs – These costs won’t obviously be included in your monthly payment. However, when budgeting for overall costs, you need to consider how much you’ll be spending for fuel each month. If you can find the right used cars that offer the best in fuel economy, you will save money each month and be good to your budget. Prices for fuel vary depending on your location and type of vehicle you’re driving. You can use a fuel cost calculator to help you when trying to estimate fuel costs for the month.
  • Maintenance Costs – No one likes to think about repair costs and getting regular oil changes and tire rotations for their vehicle. However, if you don’t properly maintain your vehicle with regular maintenance, it won’t take care of you and operate optimally. Then, you will end up paying more costly repairs. Depending on where you take your vehicle, oil changes may cost between $20 – $70. If you want to plan for such costs properly, you should estimate approximately 5 percent of the car’s cost to be added to savings for possible future repair costs.

So, before you buy your next used car, take the time to go over your current budget. You don’t want to be surprised when you get to the dealership, and the salesperson explains what your monthly payment will be—and it’s way out of your financial capacity. It pays to know what you can actually afford each month. Make sure you consider the total cost of a vehicle, not just the low sticker price. As mentioned, you’ll be paying more than just the sticker price when you add in the sales tax, fees, insurance, and estimate for fuel and maintenance and repair costs. The savvy consumer knows how to prepare for all of these expenses, so they will not be caught off guard when the time comes for the car’s first oil change or tire rotation.

This can be a fun experience. Do your homework. Plan ahead, and you’ll be fine. When you work with McCluskey Chevrolet, we will help you along the way in your shopping journey for used cars.

Used Cars at McCluskey Chevrolet

At McCluskey Chevrolet, we pride ourselves on ensuring a joyous car buying experience for our customers. You will find a wide variety of used cars and certified pre-owned Chevys at the best prices on the market. We believe in cultivating superior customer satisfaction through our extensive inventory and customer-centric professional service from our team of professionals. You won’t experience buyer’s remorse when shopping for used cars at our dealership because we work hard to find out what you are specifically looking for and help you find it. Find out more about the McCluskey difference by visiting our dealership and meet with our friendly sales team today.

You can easily navigate our website before visiting our dealership so you can review our current used cars inventory. We make the financing process easy. You can apply for financing online to quickly and safely get pre-qualified.

After purchasing one of our used cars, we make it easy for you to bring the vehicle in for regular oil changes and tire rotations. We value your time and budget and have an excellent team of professional mechanics delivering comprehensive care for your vehicle.

Posted in Used Cars