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7 ways that confirm you can’t afford to buy a car
I’ve written plenty of articles on car purchases, and one of the primary reasons is that too many people make this one financial mistake too often.
What is the financial mistake? Buying a car you can’t afford.
It’s a problem and wreaking financial havoc in people’s lives daily.
The average monthly car loan payment in the U.S. is $700 for new vehicles and $525 for used ones originated in the third quarter of 2022, according to credit reporting agency Experian. It’s worth noting that recent reports from other industry analysts place the average monthly car payment even higher for new vehicles (Nerd Wallet).
We are in a recession, most people are in debt, and people are still buying new cars they can’t afford, adding to their debt load.
Mainly because they don’t understand that short-term sacrifice will create the opportunity for them to buy almost any car at a future point without it hurting their financial situation.
Here’s how to tell if you can’t afford a car:
You can’t afford to pay for the car in cash if you didn’t take out a loan because you don’t have the cash on hand; this is not an unrealistic occurrence since most people can’t afford a $500 emergency.
You are off track with your retirement or long-term savings plan. Or better yet, you don’t have any savings, period.
Your monthly expenses exceed your monthly income.
You struggle or dread to pay your car payment each month.
You had to “make it work financially” when purchasing the car.
You can only afford to make minimum payments on the car.
By the time you end up paying off the car, you’ll have paid more than double; this means your credit is not in the best shape, or you got a bad deal.
I knew someone that had a $500 car payment. They bought the car for $15,000. By the time they paid the car off, they had paid $30,000.
WTF.
But that was all they could afford since their credit was not in the best shape, and they couldn’t make a significant downpayment.
Then you have people who earn a significant amount of money but waste so much of it on a car.
If you buy a $140,000 car and your savings are less than that, you just bought your way into debt. You’re not financially free and can’t pay off your car in cash which is #1 on the list above.
The New Car High
Nice cars look great, feel great, and smell great. The high from riding on pretty wheels will make any person feel more confident.
But they’re not too friendly to your financial situation if you can’t truly afford them.
What If You CAN Afford A New Car?
I’ve been able to afford a new car for the past decade, but I still haven’t bought one. Eventually, I plan to bite the bullet, but I’m taking my time.
There should never be a rush on materialistic items.
Focus on ensuring your financial goals are appropriately aligned and everything is in order before making a significant purchase.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.