How Much Car Can You Really Afford?

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If you are like most people who are in the market to purchase a car in the near future, you may have used an online loan calculator to estimate monthly payments. This may have told you roughly how expensive of a car you can afford to buy based on the total monthly payment and the down payment that you have available. However, there are other factors to consider as well before you make your final buying decision.

Analyzing the Total Cost of Ownership

If you want to ensure that you can afford the vehicle that you have your eyes set on, it is important that you understand the total cost of ownership. The monthly payment is only one component of the regular expense associated with driving a car. The vehicle that you purchase will have a direct impact on your auto insurance premium as well as your gas expense. In fact, the difference between various models can be rather drastic. Calculate the total gas expense that you will pay each month based on the gas economy of the vehicle, and get a quote from an insurance company for the premium. A final expense to consider is the repair and maintenance expense for the car, and you can research this information online.

Adjusting Your Budget

As you can see, when you only take into account the monthly payment on an auto loan or lease, you may be overlooking several hundred dollars in expenses in some cases. This can make a huge difference in how affordable the vehicle actually is to drive. After you have researched all of these expenses, you can adjust your budget accordingly. This will tell you if you can actually afford to own and drive the vehicle that you are thinking about purchasing.

It is common to only look at the monthly auto loan or lease payment when determining if a vehicle is affordable to purchase. While this is the largest expense associated with a vehicle in most cases, it is not the only one.

The secondary expenses can add up to a considerable amount of money, so be sure to factor them into your calculations when making a buying decision.


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