Yahoo Finance How Much of a Car Upgrade Can You Afford?
If you think the auto market is too expensive these days, you’re not alone. Although new car prices have fallen somewhat in the last year, they’re still about 23% higher than they were three years ago, according to Kelley Blue Book. And many drivers are feeling the squeeze.
Check Out: 4 Affordable, Reliable Cars for Retirees Living Only on Social Security
Learn More: How To Get $340 Per Year in Cash Back on Gas and Other Things You Already Buy
But when you need to upgrade your car, you don’t have time to wait for prices to fall. This quick guide will walk you through some affordable ways to improve your ride and some tips to help you figure out how much of an upgrade you can afford.
Tough economic times don’t mean you should lose your mode of transportation. Here’s what you need to know.
How Much Should You Spend on Your Car?
Most financial experts recommend spending no more than 10% to 15% of your net monthly income on a car. So if your household earns $75,000 per year, you shouldn’t be spending more than $937 on your car — or cars — each month.
Other calculations apply to one-time payments. For example, if you’re purchasing a new car, a general rule of thumb is to spend no more than 20% of the car’s total value as a down payment. We can also extend the 20% rule to upgrades on your current car: If your car is worth $10,000 as is, you should limit your spending to $2,000 on one-time upgrades.
Of course, these are just guidelines. As car prices and interest rates fluctuate, the 10% to 15% rule might not seem doable. Just remember that a car is a depreciating asset, not an investment. The money you spend on your vehicle won’t contribute to your future wealth, so it’s smart to stick to your budget as much as possible.
Discover More: 6 Car Brands With Reliable Used Cars
Buying a Car
Buying a new car is a big commitment. Whether you’re shopping for a brand-new or used car, you should be prepared to increase your monthly spending. Here are a few tips to help make your purchase as affordable as possible.
Set Your Budget First
Before you start perusing online listings, decide how much you’re willing to pay. It’s easy to get distracted by sales tactics and flashy new models once you start shopping. Determine your maximum price beforehand so you know what you’re looking for.
It might also help to bring a friend, partner or parent to the dealership with you. Having another person there can help you stick to your budget without getting overwhelmed.
Do Your Homework
Preparing to buy a new car starts long before you get to the dealership. Research common prices, interest rates and sales in your area to make sure you’re getting the best deal.
It might also help to get a free online quote from a few dealerships before you make your final decision. Just make sure those quotes don’t require a hard credit check.
Plan for Future Costs
When you’re buying a new car, it’s important to plan for all of the long-term costs, not just what you’re spending immediately. The average auto loan term in 2024 is around 68 months for new cars, according to Experian.
Consider your financial plans for the next few years. Are you planning on buying a home or starting a family? Don’t agree to an expensive auto loan if it could hinder your long-term goals.
On top of that, you must consider maintenance and repair costs. Some cars require more expensive upkeep than others. For example, a car with poor gas mileage will cost you more in the long run than a hybrid, and a car with 200,000 miles on the odometer likely will need repairs before a newer car. Considering the long-term costs, you may want to pay slightly more up front for a vehicle that will help you save in the future.
Upgrading Your Car
If you don’t have room in your budget for a new car right now, don’t worry. There are ways to upgrade your current ride and boost its value without committing to a new auto loan. Here are a few examples.
Upgrade Your Tires
Need a better car for stormy weather? Consider upgrading to all-weather tires or snow tires. Although your tires should be upgraded at least every six years, a seasonal upgrade can improve your car’s safety and support a smoother ride.
Install LED Lights
LED headlight bulbs are relatively affordable, and you can install them yourself. You also can replace your headlight casings to boost your visibility at night.
Buy Seat Covers
Seat covers can go a long way toward making your car more comfortable and stylish. They’ll cover sun fading and stains, protect your car from pet damage and even provide lumbar support. To add to your car’s new interior, you also could install a matching steering wheel cover.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: How Much of a Car Upgrade Can You Afford?
