Like most everything else these days, car prices have skyrocketed. Cars have always been expensive, but the pandemic has had a tremendous impact. First, car prices rose due to high demand and low inventory. We’re hoping that prices will drop as supply chain issues are fixed and there’s a better balance between supply and demand.
However, now we’re dealing with a new problem: rising inflation. Inflation is driving up car prices, just as it is fuel, groceries and utilities. In 2021, inflation rose to 7 percent, the biggest increase in nearly 40 years. Used car and truck prices shot up 37 percent last year, with the average used vehicle costing $29,000.
If you need a new vehicle, you might be stressing about how you can afford it. Below are three tips that will help you afford a vehicle of your choice!
Set a Monthly Number
The first step when buying any car is to set a monthly budget for what you can afford. Don’t forget your car insurance payments, too. Experts recommend spending no more than 15 percent of your monthly take-home pay on a vehicle. Depending on your budget, you may have to stick closer to 10 percent.
Based on these numbers, if you were to bring home $3,000 a month, your car payments should be around $300 to $450 a month. This is actually a good number to work with, providing that you’re interested in buying a sedan or coupe. If you’re looking for an SUV or truck, it might be more of a stretch.
Calculate Your Monthly Payment
Once you know how much you can spend, you can start shopping around for vehicles in your price range. New car ads and review sites generally list out the MSRP (manufacturer’s suggested retail price), but you can use a calculator to determine what your monthly payments will look like.
To get an accurate picture of what you’ll be paying, be sure to enter in your down payment and interest rate on the site’s calculator. Your interest rate depends on your credit score. Average interest rates with good credit (661-780) are 3.56 percent for new cars and 5.58 percent for used cars at the time of this writing.
Shop for Repossessed Cars
With the market being as competitive as it is, it’s helpful to shop for cars in different ways. For example, some people are shopping online and having their vehicles delivered to them. Others are attending auctions in their area. Another option you may not have yet considered is repossessed vehicles.
Repo vehicles are those that were taken away from their previous owners because they defaulted on their loans. These cars are often newer and in good condition – their owners just could no longer afford them. Many repossessed cars are sold in auctions, but RepoFinder sells them to the general public.
You can save up to 30-40 percent on a repossessed vehicle. And, because RepoFinder features vehicles being sold by banks and credit unions, you can often work out an even better deal by securing financing through them! To learn more about purchasing a repo car in your area, shop with RepoFinder today!