How to Buy A Car on a Single Income

Let’s face it, buying a car is expensive. Whether you have just graduated from school, work as a single parent, or live independently, most people need a car to get to where they need to be. However, the process of buying and maintaining your vehicle can put a huge dent in your monthly expense on a single income. Thankfully, there are several things you can do make to buy a car without going into debt.

Start With the Right Mindset

According to statistics, the average American household makes roughly $50,000 per year. When it comes to shopping for affordable car deals, one of the most important things to consider is to pay cash. Keep in mind that car payments are not necessary, even in today’s economy.

Following the 20/10/4 guide will help you better understand how much you are able to put into your vehicle purse. If you don’t have even for the 20 percent down payment, you will still have the option to put down the lesser amount. Most financial experts recommend that buyers limit their purchase price to around 10-15% of your annual pay. If you’re buying a car worth $30,000 on a $50,000 salary, then you will be paying around 25% of your annual income on car-related related expenses.

You can limit how much you spend on your car purchase by saving up and buying a used car or paying cash in full. Either option will help save you thousands of dollars when compared to applying for a loan or leasing a new vehicle.

Check Your Credit

Your individual credit score will play a vital role in determining whether you can actually afford to buy a car. Most lenders will use your score to decide whether to offer you credit. You can request your credit score online and make sure you get a copy before you stay applying for a single income loan.

Generally, ‘good credit’ will range between 622 and 1200. Anything below 621 is considered below average, but this doesn’t rule out your chance of a successful approval. Be sure to check out your loan options determine which is right for you.

Prioritize Your Finances 

Lenders tend to favor low-risk applicants. The riskier the loan application may be, the fewer chances they will approve it. Some of the most common red flags for lenders include:

  • Credit defaults
  • Late or missed payments
  • Unpaid bills
  • Bankruptcy
  • Part IX debt agreements

Before you start applying for any vehicle financing, take the time to prioritize your finances to increase the chances of a successful application. However, it is important to understand that every time you apply for a car loan, it will appear on your credit history. Having multiple applications could be a major red flag for lenders, especially when they’re denied.

Decide on How You Choose to Buy

Consider how you plan to pay for the vehicle. Keep in mind that your choice of vehicle may affect your capacity to secure a car loan with a single income. Using the right tools will help buyers understand a vehicle’s actual retail price from the average sale transactions.

Here are the most common options:

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    Buy Used – Purchasing a used car will give you the most out of your money. However, you will have to pay a high-interest rate, short warranty, and less knowledge of the car’s history.
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    Lease – Purchasing a leased vehicle allows you to get an upscale car model. However, you will not own the car itself. It is important that you understand the lease terms to avoid any large penalties.
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    Buy New – Purchasing a new car for the same amount may result in fewer features. Yet, you will benefit from a full warranty and pay a low-interest rate. Additionally, most car owners qualify for a free maintenance service and roadside assistance.

By staying flexible in the vehicle options you choose to buy, this may be able to broaden your options without compromising safety or quality. In addition, there are more affordable brand new cars available than ever. As a result, you will have a variety of options to choose from, regardless of your budget.

Assess Your Vehicle Purchase Costs

Once you decide on your purchase, determine the vehicle and the costs that will be required. Consider how they will fit your budget and calculate the fuel based on the number of miles you drive on average. Before you visit the dealer, be sure to secure financing from a bank or credit union if you plan to pay monthly.

The longer the term of your loan, the more interest you will have to play. This means you will also have to meet the requirements of your lender’s insurance. Most personal finance experts recommend four years as the maximum loan term. Ig you can pay off your car in less time, you will end up paying less interest.

When it’s time to buy a car, if you can pay a monthly payment, there are ways to pay cash when you have the right guide. Consider your lifestyle and the type of car you will spend your time driving in. For those who have long daily commutes, consider a gas-efficient vehicle. If you work from home, an inexpensive used car will help you maintain a budget and help you save instead. Be sure to choose only what you can afford and save for a higher down payment for a stress-free purchase. 

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