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How Much Car Can I Afford for $300 a Month?

how much car can i afford for $300 a month
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Cars are expensive and if you’re on a tight budget, it can seem like it is impossible to afford one. This is especially true if you don’t have a lot of money for a monthly car payment. In fact, someone asked me the other day, “How much car can I afford for $300 a month,” so I thought I’d share the answer with all of you.

how much car can i afford for $300 a month

How Much Car Can I Afford for $300 a Month?

It’s funny. It wasn’t all that long ago that a $300 dollar monthly car payment seemed really high and only for those with a huge income.

Nowadays, $300 dollars for a car payment is on the low end. 

So, just how much car can you get?

It will depend on the interest rate you receive and the length of the loan term.

For example, if you receive a 4 percent interest rate and you have a loan term of 60 months, and you want to pay $300 per month for your loan payment, you can afford to purchase a vehicle for $16,300 dollars.

On the other hand, if you have excellent credit and receive an interest rate of 1 percent, then you can afford $17,500 dollars.

Keep in mind, if your credit score is on the bad side, you may be paying an 8 or 10, or even 15 percent interest rate.

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That means if you receive a 10 percent interest rate you can only afford a $14,100 vehicle.

Here is a free loan calculator you can play with to determine what works for your specific situation.

While it’s all well and fine to come up with this number, it is important to remember that your auto loan is only one expense when it comes to owning a car.

You will also want to consider the other monthly expenses that come with owning a vehicle to determine the true cost of your new car.

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Additional Considerations and Expenses

Here are some expenses you should be thinking about when buying a new car and deciding if you can afford it.

1. Insurance costs

If there is one thing that is true about car insurance is that it never goes down. It always goes up even if you haven’t had an accident or other issues.

If you do have an accident or get a ticket, forget about it. You’re going to be paying higher rates.

It’s also true that the more expensive car you buy the more you will pay for car insurance.

Give your insurer a call before you buy. They will be able to tell you what to expect when it comes to insurance rates. It will help take some of the sticker shock out of it for you.

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2. Sales Taxes 

When you buy a new vehicle, you have to pay sales tax. Typically, this gets rolled into the purchase price and you see it in your monthly payment.

It all depends on the loan terms. 

However it is paid, it’s a big expense and can be hundreds if not thousands of dollars. In some states, you now have to pay taxes on the amount you receive for your trade-in as well.

Here in Illinois, this just started this past year. If you don’t pay it, you can’t get your license plate or tags.

3. Your Trade-In

If you have a car or truck that is paid off, take the time to look at the Kelley Blue Book value. Don’t skip over this.

Your paid-off vehicle is an asset and you need to get as much for it as you possibly can.

The dealer will try to low-ball you on the trade-in value of your vehicle.

Don’t let them.

If you have a car worth $5,000 that means you can buy a more expensive car and still end up at that magic $300 a month payment.

Your trade-in and downpayment play a big factor in how much you can spend on a car.

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4. Your Monthly Budget

Before you buy a car, take a close look at your monthly budget and your current bills. What expenses do you have that you need to cover each and every month?

What are your debt payments such as student loans or personal loans or a credit card or cards?

Take all of this into account when deciding if you can really afford that $300 dollar a month payment.

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5. Your Job

Is your job stable? Will you have it a year from now? Five years? And what about your take-home pay?

Will it go up or will it go down?

Be sure that your income is stable before making your purchase.

The last thing you want is to buy a new car and then have it repossessed months later because you can’t make the payments.

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To Sum it All Up:

How much car you can afford with a $300 dollar per month payment will depend on your credit score, how much money you have to put down, and if you have a trade-in. Chances are, the price range will be between $14,000 and $17,000 dollars.

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