Can I Afford a Car?
A Quick Way to Determine

Can you really afford a car? In today's world of credit cards and cash advances, it's all too easy to run to a car dealership and buy a car without having the money to pay for it on hand. Far too many people do this and then find themselves confronting major financial problems down the road when it becomes all too clear to them that they can't afford their car.

So before you seriously start looking into buying a car, you really need to take a good hard look at your bank account and earning potential and ask yourself the following question: can I afford my car?

Here's a quick and easy way to determine if you can afford a car: do you have income? If you don't, then a new car is probably not in your near future. Don't let anyone talk you into a car you can't afford – not well meaning friends, eager salespeople or credit card solicitations.

Even if you have some savings in the bank, many people tend to forget that cars cost more than just the price tag. For instance, just because you can afford the down payment for a car doesn't mean you can afford to deal with monthly payments to the dealership or your car insurance.

If you do have a steady income, the next thing you should do is figure out a budget. This will help you figure out if you can afford a car, and how much you can spend. If you need some help, there are calculators available online that can calculate fees and payments for you so you will get a ballpark idea of what you should expect to be paying. A quick rule of thumb is that you should never buy a car that costs more than half your annual income.

For example, if you make $30,000 a year, that means you should spend no more than $15,000 on the car. You should also be able to finance your car for anywhere between 48 and 72 months. You should also be expecting to keep that $15,000 car for many years to come.

There are many better options to afford a car besides taking out a loan for your new vehicle. They take a little more patience and hard work but in the long run they'll be much better for you. To start with, you can buy a more affordable car. For example, if you already have $10,000 allotted for a new vehicle, you should use that amount as your total budget.

A lot of people combine that $10,000 in car savings with another $10,000 loan from their bank, so that they can buy a $20,000 car. Taking out a loan for something that depreciates in value is never recommended.

Your other option is to start saving. If you save a little better and work a little harder you can likely get that extra $10,000 and buy the car that you really want. Just because you can take out a loan, doesn't mean that you should. If you lose your job tomorrow, you're going to have an expensive car sitting in your driveway that you can't pay for. And that's certainly not smart financial planning.

Weigh out all your options before signing any papers… if you think you might not be able to afford a car then wait a few months to make sure you're ready. A car is a very large purchase and the decision to buy should not be taken lightly.

This guest post is by Ryan Embly from the cheap rental car website CarRentalExpress.com.

Now that you have determined whether you really can afford a car, there are many more ideas for living on a budget including financial freedom keys.

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