It’s only October, and I’ve already spent over $5,300 on car repairs: a new windshield, four new tires, an oil change, a complete brake overhaul–new pads, rotors, calipers, and even a master cylinder, a new battery, and now… a new transmission! So far this year, I’ve spent an average of $530 per month on car repairs–money I don’t have! I know I could get a new car and pay less than that!


Does this look like your situation? Are you driving an old, unreliable car and paying more per month than you probably would if you traded it in and got a newer, more reliable vehicle? If so, maybe you should look at upgrading your mode of transportation.


You already know $530 per month is way out of your price range (you’ll be paying those car repairs off for quite awhile). After looking over your budget–your mortgage payment, utilities, credit card payments, etc., you’ve determined you can only afford around $450 per month toward car expenses. So how much car can that buy?


Don’t make the mistake many individuals make and only look at the sticker price. There are a few additional things to take into consideration when deciding how much you can afford to spend on a new car:


  1. Look for the best monthly car loan payment, not necessarily the sticker price.

To figure out which car you can afford to buy, it’s important to make comparisons between the possible monthly car loan amounts you may be paying. The optimal situation would utilize the 20/4/10 rule where you should put 20% down, pay the loan off in four years, and not have monthly auto expenses totalling more than 10% of your gross monthly income (the amount you make before taxes and other expenses are deducted).


There are several auto loan calculators to help you make those comparisons. Try adjusting the possible monthly car loan payments by inputting into the calculator situations with more or less money down, and by trying out several different scenarios with lower interest rates until you find a manageable car payment. Now, shop around for a car loan with the down payment and interest rates you feel you can handle.


  1. Shop around for car insurance.

Don’t forget to consider the cost of car insurance when figuring out your total monthly car expenses. And just because it is an expense you already may have with your current car, don’t expect the cost to stay the same. Newer cars, luxury cars, and cars with fewer miles could all raise your rates. Also, understand that just because you have car insurance already doesn’t mean you should necessarily keep the same policy for the new vehicle. It’s possible that a new policy may offer you the cheapest car insurance for your new purchase.


  1. Don’t forget other car related expenses that could add up.

When you finally purchase your new car, you’ll have taxes and fees and interest rolled into your total loan amount and spread out over the life of the loan. The auto loan calculator takes these expenses into account, it doesn’t take into account the yearly registration fees, safety and emissions inspections, and property taxes that could add an extra $10-$20 per month if broken down over time.


There may also be added gasoline expenses if the new car is less fuel efficient than your previous one (it could be lower, however, so that would be a plus). Regardless, the expected expense should be added into the monthly auto expense budget.


Money for car maintenance should also be set aside monthly to handle future, unexpected expenditures and to cover routine maintenance costs such as oil changes, tire rotations, etc throughout the year.


All of these extra expenses may not seem like much individually, but together they can have an impact on your total monthly car expenses.


To understand what your spending limits should be, look beyond the sticker price and instead, determine possible monthly payment scenarios; shop around for car insurance, and take into consideration the financial implications of changes; and remember to add in other additional expenditures such as yearly taxes, fees and inspection costs, gasoline, and maintenance. If you’re careful not to go above 10% of your gross income, and if you’re careful to stay within your budget, your new car will give you a financial freedom your old, unreliable car couldn’t. No more almost-monthly repair costs and unreliable transportation.