How Much Can You Really Afford to Spend on a Car?

When it comes to choosing a new or pre-owned vehicle, one of the greatest deciding factors is often the price. It is also usually the first or second question a car salesperson will ask you, as it will quickly narrow down your options when you are shopping for a specific vehicle type.

But what many car buyers (especially first-timers) fail to realize is that there is a lot more to the “cost” of a vehicle than just the purchase price. There are many additional expenses that go into buying and maintaining a car.

For example, luxury vehicles cost much more to maintain, insure, and repair than other models. Furthermore, while an older, used car might save you some money upfront, it could cost you quite a pretty penny to replace worn out parts.

So, this begs the question, how much can you actually afford to spend on a car?

If you are looking for new or used cars in Albuquerque for sale, you will need to have a good idea of how much you can afford to spend without breaking the bank.

Let’s dive in.

Follow the 20 Percent Rule

Unless you are planning to purchase a car in cash upfront, you will most likely be taking out a loan through your bank and paying in monthly installments. As a general rule of thumb, you should never spend more than 20 percent of your take-home pay on car expenses.

Car Expense

Remember that this total cost is not limited to that monthly car payment; it also should include regular maintenance, insurance, and gas.

Before you go car shopping, sit down to figure out what your actual monthly budget is by calculating this 20 percent figure. Then, start to factor in your estimated costs for maintenance, gas, car insurance, and so on.

Note that these numbers could drastically change depending on the type of vehicle you choose. For example, if you are planning to purchase a larger vehicle like an SUV or pickup truck, you should expect to pay a little bit more in gas.

Remember too that your insurance rates could fluctuate depending on the car you get. If you are planning on getting a sporty convertible, your insurance rates might actually increase. Check out this resource to help you get a better idea of what your insurance rate will most likely be depending on the type of vehicle you purchase.

Consider What’s Most Important to You

Sure, we all have that dream vehicle we would love to peel off the lot with. But, more realistically, you will need to make some compromises in order to find the vehicle that fits best into your lifestyle and budget.

Dream Car

How much you can spend on the vehicle itself depends on what extra payments are the most important to you.

To start off, it may be helpful to make a list of your absolute “must haves” and a list of “wishes.”

Do you really need to have a blue-tooth stereo system, sunroof, and V8 engine, or do those belong on the wish list? Does your car need to be brand new or should you consider a used vehicle to save yourself some money?

Again, don’t forget about those other expenses. Different features will affect those additional costs. For example, brand new cars with complex electrical systems or modified devices will be much more expensive to repair.

Consider other non-negotiables too, such as your insurance coverage. If you don’t feel safe driving on the road unless you have top-tier car insurance coverage, then you’ll need to subtract some money from your planned car payment and put it toward your insurance.

Ask Yourself What Fits into Your Lifestyle

Unless you are just in the market for a fun vehicle to drive around from time to time, you are shopping for a car that needs to fulfill a specific purpose.

  • Maybe it’s a reliable car that will get you to work each day.
  • Maybe it’s a second family vehicle that’s large enough to fit the kids, their school stuff, and the dog without being cramped.

Family Car

As you figure out your car-buying budget, ask yourself: What exactly are you using the car for?

Will you be driving it for work and writing off some of the miles as business expenses? Do you need it to impress big-wig clients you’ll take out to lunch? In that case, perhaps it is necessary for you to get a fancier sedan with some added bells and whistles.

On the other hand, if you are only using the car for yourself to drive to and from work and around town, then you can probably go with a low-frills car that gets fairly good city gas mileage.

Remember, not everyone needs the same type of car, nor can everyone afford the newest model. Your decision should depend on your job, lifestyle, and financial circumstances. While you may be able to get that dream car of yours in the future, it might be a better financial move to stick to only what you need and compromise on some of those fancy additions.


Getting a new vehicle for you and your family should be a fun, exciting time – not an experience that is stressful.

By figuring out your exact list of must-haves and determining your actual budget, you will be able to limit down your options much easier and find that perfect car that fits your lifestyle and your wallet.

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