Follow the 20/4/10 rule. This rule helps you to keep a realistic plan in mind when saving and shopping for your next car.

• Save for a 20 percent down payment

• Apply and budget for a 4-year car loan

• Budget for car loan payment and operating costs at 10 percent of your monthly net income

20% – Down Payment

Save 20 percent of the total cost of your used car, truck, or SUV for a down payment. Sometimes buying a new form of transportation is an emergency, so it’s tough to dig that much change out of the couch cushions. However, if you’ve been planning on buying a new car for a while, set 20 percent of the cost as a goal for your down payment. This not only helps reduce the cost of the vehicle by 20 percent but helps you to understand the true value of the vehicle you’re buying. So, if you want to buy a used Chevy Silverado 1500 that’s priced around $30,000, set $6,000 as your goal for a down payment.

4 – Years for Loan

Shoot to find a used car in Anchorage that’s priced to fit your monthly budget with a car loan that has a 48-month term. As we know, it’s easy to spread the loan out over a longer term to lower the cost of the monthly payment. However, this only increases the amount of money you’ll pay in interest and skyrocket the end amount that you pay for the car. With a four-year loan as the ideal term for your loan, be sure to keep your monthly payment within the parameters you’ve set.

10% – Monthly Payment and Vehicle Operating Costs

An easy way to budget your monthly car payment, try to keep your monthly payment and operating costs under 10 percent of your monthly take-home income. Don’t budget this off your gross income, because you’ll end up “car poor,” which is when your car payment is sucking up all your monthly funds and you’ll have a hard time meeting the financial demands that come with operating your car. For example, if you bring home $3,000 per month, you can afford a car with a monthly payment and operating cost of $300 monthly.

It’s important remember that there are other costs that come with owning and operating a car besides the monthly payment. You need to remember that you’ll have to insure your car, put gas in it, and change the oil every few months. Maintaining your car shouldn’t drain your savings account or consume your paycheck just to put gas in it. Keep in mind that high-end sports cars don’t run on fuel with an 89 octane rating or simple 10W-40 oil. If you’re in the market for a something like a used Cadillac Escalade, you’re going to need to put premium fuel and synthetic oil in your monthly budget.

To help you get an idea of where a monthly car payment will shape up, use a car loan calculator to plan your budget. Take these rules with you when planning your monthly car payment. You can easily find a used car within your budget and still live a comfortable lifestyle.

The post How much can I afford for a car loan? appeared first on Used Cars Anchorage.

Prepare ahead of time

You can prepare yourself ahead of time by understanding a few things about what goes into financing a used car. One thing that’s important to know is your credit score. If you have a low credit score or no credit at all, there’s a chance you’ll have a hard time getting the good interest rate on your car loan. However, knowing you have a low credit score does not mean that all is lost, it just means that you have to adjust your budget. You’ll want to lower your budget a bit so that you can account for a higher monthly payment to go with a higher interest rate. Some used car dealerships in Anchorage are also specifically equipped for helping you qualify for a bad credit car loan. This leads to our next point.

Figure out your budget

Make sure you know what you can afford for a monthly used car payment. It’s easy shop a used car dealership’s inventory and let your eyes get big when you see that low-mileage Cadillac, but your wallet will quickly feel the effects. Know how much you can afford to finance for your used car. Figure out your number and start shopping around for used car financing.

A handy tool to help with your budget is a car loan calculator. By plugging your down payment or trade-in amount, loan interest rate, and loan term you can get an estimate of your monthly used car payment.

Find financing

There are a number of places you can find financing for your used car. Either go to your personal bank or credit union before you go to the used car dealership or let the dealership itself help you find financing.

You can visit your Anchorage bank or credit union before you step foot on a car lot and apply for auto loans. This saves time at the dealership and gives you the same kind of buying power as a cash payer because you have money in-hand. You can save money on your used car this way.

Or, you can save yourself the effort of applying for a used car loan beforehand and let the dealership help you secure financing. The finance department at the dealership will work with local financial institutions to help secure your used car loan. This takes the majority of the work out of your hands, but you’ll likely end up doing a lot of waiting at the dealership as they work through this process for you.

Shop around for interest rates

Like shopping for your next car, you don’t have to accept the first loan that’s offered to you. You can shop around financial institutions and find an interest rate that’s best for you. Don’t feel like just because somebody has helped you through this process you’re obligated to take their offer. You’re the customer and it’s your money. Be sure to do what’s best for you and take the interest rate that works best for your budget.

Now that you’re armed with the basics for securing used car financing, go out there without worry and get the used car you’ve always wanted.

The post How do I secure a used car loan? appeared first on Used Cars Anchorage.