Calculating Vehicle Budget in Salem, VA

How Much Car Can You Afford?

Berglund Mazda offers a wide range of vehicles, from frugal but wonderful pre-owned models to cutting-edge new Mazda SUV models with all the bells and whistles. But before embarking on your hunt for a new vehicle, pause and assess your financial situation to identify your spending capacity. Being clear on your budget before visiting Berglund Mazda can streamline the selection process by narrowing your options to cars that match your finances. It will also help our representative make recommendations tailored to both your lifestyle and financial means.

But how do you determine the amount you can allocate for a new vehicle?

Determining Your Monthly Transportation Budget

The first thing you need to do is determine what your monthly budget is for all of your transportation expenses. The leading financial experts advise spending 10% to 15% of monthly household income on transportation. For example, if you take home $5,000 per month after taxes and health insurance, your transportation budget should be between $500 and $750. That doesn't mean you can spend the whole shebang on a car with massaging leather seats, a premium stereo, and a V8 engine. Your transportation budget should include your car payments, fuel, maintenance, insurance, and other expenses associated with owning a vehicle. Review the list of car expenses below to get a full picture of what you should be budgeting for.

The initial step is to ascertain your monthly allocation for all transport-related costs. Top financial advisors recommend allocating 10% to 15% of your monthly household income towards transportation. So, if your post-tax and health insurance take-home is $5,000 every month, then your transportation expenditure should range from $500 to $750. However, this doesn't imply that this entire amount can be splurged on a luxurious car with plush leather seats, a high-end sound system, and a powerful V8 engine. This transportation budget must encompass all your transportation expenses - car payments, fuel, upkeep and repairs, insurance, and other related expenses of car ownership.

Understanding Transportation Expenses

Car Loans and Monthly Payments: When opting to finance your vehicle, one of the most significant recurring transportation costs you will face is your monthly car payment. It's important to note that a substantial portion of this payment isn't directly attributed to the principal amount (i.e., the car's cost) but goes towards covering the interest accrued on the car loan. If you want to reduce these monthly payments, it's crucial to shop around and compare financing rates across different lenders. By securing a lower interest rate, you can save significantly over the lifespan of the loan.

Taxes and Associated Fees: Ownership of a vehicle comes with a myriad of taxes and fees that one must be prepared for. This includes sales tax when purchasing the car, periodic registration fees, and other charges like insurance premiums. These costs can vary depending on your state and the age and type of your vehicle.

Fuel Costs: The expenses associated with fueling your vehicle can fluctuate based on the car's make and model and your driving habits. On average, it's estimated that Americans allocate about $150 to $200 every month for gasoline. To get a more tailored estimate of your potential fuel costs, consider the vehicles you're interested in and use the following formula:

Annual Fuel Cost = (Annual Miles Driven / Miles Per Gallon) * Cost of Fuel per Gallon

If you're not sure how many miles you drive, the average American drives between 12,000 and 17,000 miles a year.

Maintenance and Repairs: No vehicle is exempt from the occasional wear and tear, even if religiously maintained. It's advisable, based on recommendations from the American Automobile Association, to set aside a budget of around $75 monthly. This covers routine maintenance, accounts for inflation, and prepares you for any unforeseen repairs that might come up.

Vehicle Insurance: Insurance is an essential component of vehicle ownership, offering protection against potential damages and liabilities. The cost can vary significantly based on factors like the vehicle's type, your driving history, and the insurance coverage level you opt for. To determine the best and most cost-effective coverage for your needs, request quotes from multiple insurance providers and compare their offerings.

Putting It All Together at Berglund Mazda

After determining your monthly transportation budget, deduct the expected expenses for insurance, maintenance, fuel, taxes, and other fees. The remaining sum is what you can allocate for a new car payment. It's vital to figure out how much you can comfortably spend on a car. Use these guidelines to evaluate the overall cost of owning a car and set a monthly payment that fits your finances. For an extensive range of new and pre-owned vehicles, along with professional guidance, visit Berglund Mazda.