How much should you spend on a car payment?

This answer will obviously differ for everyone, but a good rule of thumb is to keep it under 10% of your monthly income. Whatever you "take-home" each month is the amount you should be considering your car payment budget on. At first, you might be disheartened by this amount. It might seem more limiting than you were originally willing to sacrifice. But there are benefits to keeping costs low, and a car payment is an easy way to do so. Besides, every driver should keep in mind the 50-30-20 rule when shopping for a new ride. You spend 50% of your take-home pay on living, transportation and food, 30% on travel, wants, and entertainment, and 20% should go directly into your savings. By following this basic rule, you'll easily align your car payment into your monthly budget. Not to mention, you'll avoid having to make sacrifices in other ways. For example, not being able to go on your next family vacation.

Don't forget insurance expenses

The problem with budgeting for a car is there comes along a list of other expenses to consider. Just like a house, buying a car is a major investment. One that includes insurance requirements, repairs and regular maintenance, and gas costs that will add up over your time of ownership. You can't cut corners on these expenses so it's important to leave room for these items in your budget. Essentially, drivers should view the car payment and any associated expenses as one item to avoid frustration later on. For instance, when you splurge on a luxury car you'll understand why the insurance costs will be a pretty penny as well.

You can shoot for the starts when it comes to buying a car, but this doesn't mean you'll end up on the right side of a deal. Although its not as fun as walking into a dealership and setting your sights on any vehicle you like, budgeting is an important way to save money both on your deal and in the future. We recommend keeping things realistic, especially during the early stages of car ownership. Once you find a car that meets your needs, you'll reap the benefits of saving and staying within budget each month. Who knows, maybe you'll have more time to travel or take up a new hobby. Definitely better than overspending on an item that is already costing enough to your lifestyle.

Linzi Martin

Linzi Martin has worked as a content manager, consultant, and writer for the past six years. She's handled everything from blogs and articles to e-books and social media content. Her work has been featured in various publications including Apartment Guide, The Startup, and Voyage Magazine. Outside of work, Linzi enjoys staying active, frequenting new restaurants around South Florida, and spending time with her family.