WHAT IS THE AVERAGE CAR PAYMENT AND HOW MUCH CAN YOU AFFORD?

Posted by Malini Somra on October 2nd, 2019

The average car payment for a car varies depending on a lot of factors such as the model of the car, mileage (if you are buying a used car), and prices of automobiles in the market among others. On the average, the average car payment for used car is around 0 and it is around 5 for new cars.

A major factor that contributes to the average car payment when you wish to buy a car is the rising car prices, although, this is cushioned by longer loan terms. In order to know what you can afford, you can make use of an auto finance calculator to help you get an estimate of what can work for you.  

Increase in car prices can make buying cars a challenging task for consumers because it will lead to huge loan amounts, higher monthly payments, and increase in interest rates. The average loan amount for a used car is ,708 while for a new car, it is around ,958 but this all depends on the type of car you want to buy. However, a way to offset this rising car prices is to make a significant down payment in order to keep the loan term shorter, get a high spec car, and also, this will make your interest rate low.  

How to Know How Much you can Afford

The best way to know how much you can afford for your car payment such that you can still keep up with other bill payments is to use an auto loan calculator. You can find these calculators online. Enter details such as APR, loan amount, loan term in months, and down payment or a trade-in if you have one. Adjust the fields by increasing the and decreasing the APR and loan term and see how the car payment changes. Do this until the monthly payment matches what you can afford monthly and at reasonable APR.

Credit Score Role

Your credit score also plays a major role in your ability to get affordable rates. The higher your credit score, the lower your interest rate. This is why people with good credit will always get a good interest rate because they are seen as a low risk borrower by lenders. 

Other Factors to Consider for Affordability

Other factors that you have to put into consideration are on-the-road-expenses like fuel expenses, cost of maintenance and repairs, servicing, and insurance among others. All these should form the basis of the kind of car that you should buy. You can use an affordability calculator to know what will perfectly fit into your budget and income.

Look Around for the Best Deals

A simple rule of thumb that will help you to shop around for the best deal is to apply for preapproval and get approved before you visit the dealerships. This will give you the exact idea of how much you are spending and you can negotiate deals that will be good for you.

The bottom line here is to know yourself, be realistic, and go for what will not put you under further financial pressure.

How does special financing work for consumers - 

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