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SDCCU Blog Posts

San Diego County Credit Union's

Not a Big Bank Blog

Because we're not a big bank, we're here to help YOU, not stockholders! Follow our new blog for financial tips ranging from balancing your checkbook to buying a home. Our goal as your financial partner is to help you make educated financial decisions for yourself and your family.

Auto Loans—How Much Car Can You Afford?

SDCCU | 3/01/2016 01:13 p.m.
As the legendary UCLA basketball coach John Wooden believed: “Failing to prepare, is preparing to fail.” This famed basketball coach’s adage especially holds true for those looking to foster a financially healthy lifestyle. And one thing that almost anyone needs to prepare for is the expense of buying a vehicle. Vehicles can be hefty life expenditures, so it’s imperative to prepare by knowing the full scope of the costs associated with buying and owning a vehicle, building a car budget and doing your research to ensure you get the best deal.

Knowing the Costs

It’s important to consider alternative costs of owning a vehicle in order to figure out what your total vehicle expense should amount to. Vehicle depreciation, finance charges, sales tax, fuel, insurance and maintenance are a few of the costs you will encounter while owning a vehicle. You will want to itemize vehicle costs and diligently include them in your vehicle budget. Keep in mind, your total transportation costs should generally not exceed 15 – 18 percent of your monthly budget.

You may have your vehicle for a long time, so planning ahead with insurance can potentially save countless dollars. A minimum auto insurance plan is mandatory—however you may want to add to it for greater protection against accident damage down the road. Weigh the cost of increasing your insurance plan and factor the additional amount into your car budget and do your research to ensure you get the best deal.

Building your Car Budget

Whether you’re earning minimum wage or six figures, everyone should be following a budget. That’s because a well-designed budget is the best way for you to reach goals and achieve financial success—without having to sacrifice all of life’s pleasures. Always remember—income does not determine how financially successful you are; your choices and priorities do!

Building a budget starts with knowing your monthly income and expenses. Always use your net income when building your vehicle budget. Your net income is what’s left of your earnings after items like payroll taxes, health insurance premiums and retirement plan contributions have been deducted from your gross pay. Then, use expense tracking software to make organizing where your money goes each month a simple process.

After constructing your budget, you will know how much of an auto payment you can comfortably handle. Auto loan calculators will help you calculate your monthly payment, as well as determining the total net cost of your car.

Research and Get the Best Deal

Now that you have your car budget figured out, it’s time to search for a great deal!

In using SDCCU’s free online auto buying services¹, you will know—with just a bit of research—whether or not you are getting a great price for your vehicle. Services such as TRUECar®² provide you with upfront dealer pricing for new and used vehicles, and you’ll receive Guaranteed Savings Certificates before you leave home.

Don’t be afraid to shop around for auto financing! When researching financial institutions for your auto loan, consider that credit unions will usually have lower rates on auto loans than big banks. That’s because credit unions are not-for-profit institutions wholly owned by their members. Members at credit unions enjoy returned dividends in the form of better interest rates, instead of dividends going to investors and shareholders.

Prepare for Financial Success

Bottom line, it can make a big difference if you fail to prepare for your vehicle purchase. Neglecting to prepare your budget and not knowing how much car you can afford can impact you for years to come. Be sure to factor all the costs into your vehicle budget accordingly, and research your options to get a great deal on your next ride…while continuing on the path to financial success!

Ready to start budgeting? Use SDCCU’s auto loan calculator to start your vehicle budget.

Already know your vehicle budget? Get pre-approved in minutes!

¹Auto sale and brokerage services provided by SD Auto Sales/Leasing. SD Auto Sales/Leasing is affiliated with SDCCU.
²TrueCar is not affiliated with SDCCU.Guaranteed Savings not available in all states. In these states, a Target Price is shown, which is a market-based example of what you can reasonably expect to pay for your vehicle as configured. Your configured vehicle may not be available or in-stock at the Certified Dealer.


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