What Car Loan Can I Afford with My Salary?
You're ready to apply for a car loan in Las Vegas, but you're not sure what kind of loan you can afford with your salary. It's important to examine your budget so that you know how much you can comfortably spend on your vehicle. Here are some guidelines to help you determine how much you should borrow when applying for a car loan in Las Vegas.
Conventional Guidelines for Car Loans
There are a couple of rules that are used when determining if a car loan is affordable for your salary.
- Spend less than 35 percent of your annual income on a vehicle. If you earn $60,000 a year, your vehicle should cost $21,000 or less. While a vehicle is a need for many individuals, you don't want to devote too much of your income to an asset that loses value.
- Your monthly vehicle expenses (including your gas, car insurance, vehicle maintenance, and loan payment) shouldn't exceed 10 percent of your gross income. If your gross income is $5,000 a month, this means that your vehicle expenses shouldn't exceed $500. Assume your car insurance is $50, you spend $100 on gas, and car maintenance is $50 a month; your car loan payment should be $300 or less. Or, on annual basis, if you have a $60,000 income, your yearly vehicle costs should be $6,000 or less.
- You might be approved for a vehicle loan that exceeds these guidelines. While you may be able to technically afford a bigger loan, this means that you'll have less money for other financial goals, like buying a home or saving for retirement.
Tips for Lowering Your Auto Loan Payment
There are a few things you can do to make your loan payment more affordable.
- Make sure that your credit score is as high as possible before applying for a loan; this will help you get a lower interest rate and lower monthly payment.
- Have some money set aside for a down payment. This reduces your loan amount so that your monthly payments are more affordable.
- See if there's an interest rate discount for having your payment automatically deducted or opting to receive online statements.
Ready to apply for your Las Vegas car loan? Contact CCCU today to start the application process!