How to Budget for a Used Car Purchase

Because buying a used car is a major financial proposition, you don’t want to overextend yourself. This is why before you start looking at used cars in Champaign, IL, it’s important to create a feasible budget. You can do this by focusing on three key areas.

Down Payment

How much money do you have on hand right now that can go towards your car purchase? You should aim to put up at least 20 percent of the sale price, as this will help reduce the amount you will need to borrow substantially. If you have a trade-in vehicle, this could supply you with much of your down payment.

Loan Term

Next, you’ll want to think the length of your loan. It’s a smart idea to have a loan term of around four years. If the term is only for a couple of years, this raises your monthly payments quite a bit. If the term is six or more years, you’ll end up paying a lot more in interest.

Monthly Payment

Finally, you have to determine how much you can pay every month. To do this, figure out how much you earn every month. Then, add up all of your expenses and subtract it from that number. That’s how much you’ll have to work with. A general rule of thumb for all car expenses (including auto payments, gas, regular maintenance, and more) is that they shouldn’t exceed 10 percent of your monthly income.

Get Quality Used Cars at the Right Price at Serra Honda of Champaign

Once you know how much you can spend on your used car, it’s time to get the financing process started. Visit Serra Honda of Champaign to talk to one of our finance professionals. Or you can get things rolling right now by filling out our online application.