The first step to any budget is getting some information on paper. You should already have a budget written out for your everyday bills and debts, but if you don’t, download a free template now and get it done. Of course, once you start the new one, or update the old one, some of the times you will have to budget for will just be an estimate.
Once you actually get a used car and everything that goes along with it, you will have to create another new version. That is what budgeting is all about, though. It is never set in stone because it must be adjusted as you move through life.
With that in mind, let’s take a look at some of the things that you will have to add to your budget
- Take Home Income – One of the first things on any budget will be the income you bring home. This is the amount after taxes and other payments (such as insurance) are taken out. Experts agree that you should never use more than 15% of your income for transportation costs.
- Existing Debt – The next thing to take into consideration will be the existing debt that you have. This is credit cards, loans, student loans, and medical bills, just to name a few. They are the things that you pay every month just to get them caught up.
- Financing – This may or may not apply to you, but if you plan to get a loan, now would be an excellent time to get pre-qualified for one. Once you do, it will show you how much your car payments will end up being and how long you will be paying them. The amount you will be paying for the loan needs to be added to your monthly bill amount.
- Taxes And Fees – Now comes the part that annoys everyone buying a car. The reason is that the price you settle for when buying a used car is not the final price. There will be some dealer fees, sales tax if it applies, and docking fees. All these can add a couple hundred dollars to the final price, but the problem is that they are due when you close the deal. Always budget this in so you actually have enough to finish the transaction.
- Registration – If you buy the used car from a lot, you will have a sticker in the back window that allows you to drive while they send the title down to your local registration building. When you go in to get registration and plates on the car, you will have to pay a set fee, which is what you need to have in the budget. Thankfully, this is a once-a-year payment unless you opt for permanent plates, but that only applies to older vehicles.
- Insurance – If you are financing the car, you must carry full coverage insurance, otherwise, liability will work. No matter how you plan to go, the amounts will need to be kept in the budget so you can factor that cost into your monthly or yearly bills.
- Maintenance – This is hard to judge, but the average amount spent on vehicle maintenance runs about 9 cents per mile. So figure out how much you drive in a month and multiply it by 9. It may not give you an exact amount, but it will be close enough to add to the budget.
When budgeting for a used car, you need to remember that buying a car is a lifetime commitment, for at least the length of time you have the vehicle. It will always require fuel, oil, maintenance, parts, and some items that turn the basic car into your own stylized one.
No matter how you look at it, the cost of the car overall may be a little more than the 15% discussed above, but that will be your call if you think you can still make all the payments without affecting the rest of your debts and bills.