When you’re thinking about buying a new car one of the first questions you have to ask yourself is, “Can I afford this?” Which of course means you need to know what your budget is and what you can afford to pay monthly for a car. I had to ask these questions recently, and while I was discouraged to learn the average new car monthly payment numbers are at an all-time high, I was ultimately able to stick to my budget and purchase the new truck I wanted by buying smart.
What’s the average new car payment?
According to LendingTree.com, “The average monthly payment for a new car is $563, while lease payments are an average $450. Used cars have the lowest average monthly payments at $397.” And it seems that CreditKarma.com agrees with these figures for vehicles in the U.S. during the second quarter of 2020, according to Experian data.
Of course, these numbers vary greatly depending on your credit score and your car’s price tag. The size of your down payment will also play a big role in determining the size of your monthly payment.
How much car can you afford?
As much fun as it is to dream about our next car, we’re all adults here, and we know that we have to look at things realistic, so the best place to start is with a budget. Once you know how much you are comfortable paying each month and how much you can offer for a down payment, you can use one of dozens of online car payment calculators.
I really like the Google calculator because it lets you work things backward by entering your preferred payment amount and the interest rate you expect to get. Then the calculator will tell you how approximately much you can borrow. Add this number to your down payment amount and you’ll have a ballpark range for shopping. Simply, Google “car payment calculator,” and use the nifty Maximum loan tab!
Jill and Tim talk about monthly car payments
In a recent live stream, Managing Editor Jill Ciminillo and Publisher Tim Esterdahl discuss monthly car payments and what they’d consider smart or doable. Jill is strongly in the “don’t buy something you can’t pay cash for” camp while Tim is a little more liberal with his budget. They even discuss paying more for an EV knowing they’d spend less on gas.
Sticking to your guns at the dealership
How do you find the truck or SUV you really want and not pay more than you can afford?
Like Tim, I recently bought a truck. Our family had outgrown our paid-for vehicles and one of them was almost 20 years old. The truck will be for both business and personal use, and I’ll be able to write it off on my taxes. I knew going into the purchase that I wanted to keep my payments around $600 a month. I researched current interest rates, and I shopped around. I built the truck I wanted on RamTrucks.com and found even with sticking to the bare minimum, I couldn’t afford a new truck. So, I let the idea rest until I found an amazing end-of-year deal that would fit my budget.
Like all good salesmen, the guy at the dealership tried his best to sell us add-ons, special warranty packages and financing with a higher interest rate. When the final numbers came back, the payments were going to be more than $750, and we almost walked. We gave them some time to try different lenders for better interest rates, and we negotiated on the warranty offerings. Our final payments ended up being in our budget. The moral of the story is, there is always room for negotiation but always stick to your budget.
So, whether you are buying new or used, and whether you’re paying cash or making a new car monthly payment that would make your grandfather roll over in his grave, we wish you happy car shopping!