logo-thrivent-rgb

TCU articles & resources

How Much Car Can You Afford?

When it comes to buying a car, it may seem straightforward. You know what kind of car you need. You know what make and model you want. But, what about the price tag? What really goes into buying a car and how do you know you’re ready for the financial commitment? Use our tips to help you find a car (and payment) that leaves room for other important financial goals, too.

how much car can you afford_image

Your payment deconstructed

First, it’s important to understand the cost of buying a car. If you’re like most Americans, you’ll likely finance the purchase by taking out an auto loan. Review a few important pieces of your payment below:

  • Total loan amount: Your loan amount will, in most cases, reflect the total cost of the car. But, if you’re able to make a down payment or trade in another car, this amount will go down, making your monthly payment more manageable.
  • Term: How many months will it take you to pay off your loan?
  • Sales tax and registration: Don’t forget to factor these costs into your price tag.
  • APR: Your annual percentage rate reflects the interest rate you’ll pay over the course of the loan term per year.

Extra car costs

While you may understand what goes into your car payment, don’t neglect the other costs that come along with car ownership. Depending on the car you choose, your car insurance could be another impactful monthly payment. There’s also gas, maintenance and emergencies to plan for. Have a good understanding of how many miles you drive in a year and consider a fuel-efficient vehicle if gas costs are a concern.

TFCU_AutoLoan_CTABanner_Financing_800x180

Planning for a payment

Adding another monthly financial commitment means you need to first take a close look at your current finances. Take time to track spending and consider your credit score. Ask some of these questions to begin the planning process:

  • Do you have room in your budget to add a monthly cost? Or, do you need to make changes to your spending behaviors to build in a new recurring payment?
  • What’s your credit score? Will your score negatively or positively impact your interactions with a lender?
  • What other financial goals do you have planned for the year? Can you still achieve those with this new payment?
  • Spend time experimenting with an auto loan calculator. What loan amount still allows you to meet other important financial needs?

Topics: Auto Loans

About our resources

Welcome to the Thrivent Credit Union resource section. Discover educational articles about topics that impact your financial journey. From buying and selling your home to online security to basic money management, we're here to serve you!

Recent articles

Subscribe to TCU articles & resources