Uncertainty in car market makes budgeting essential

(InvestigateTV) — New car buyers are facing stiff headwinds with a 28% increase in price over the last five years and concerns about a spike in MSRP due to proposed tariffs.

Cherry Dale, a financial coach with the Virginia Credit Union, said it is essential, now more than ever, for buyers to make a plan before making a purchase.

She said consumers should look at their budget and find out what they can afford as a monthly car payment.

“A good rule of thumb is 10% of your net income,” Dale said. “So, let’s say you’re bringing net home $4,000 a month, you’re looking at a car payment of around $400 a month. And you really want to stay within those perimeters.”

Dale said you also need to factor in the type of interest rate and down payment amount.

Understanding that monthly cost and how it’s going to impact the monthly budget is key.

She said buyers should also factor in yearly property taxes if they live in one of the 25 states that charge them for vehicles.

Gas or electric, insurance, and maintenance costs should also be included in budget considerations.“You want to look at new versus used cars,” Dale advised. “Understand the implications of purchasing either. There’s opportunity cost to everything that we do. New cars of course are exciting. You can go in, order to get exactly what you want. There might be warranties around it, hopefully it will last you a lot longer than a used car.”

She reminded buyers that a new car depreciates in value a lot faster than a used car.She said it might not hurt to start out by looking at used cars. There could be a deal that just fits the budget right away.

The Federal Trade Commission (FTC) has a free website with expert advice on buying and owning a vehicle.

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