The First Stop on the Auto Buying Roadmap is Your

Budget

Know your financial limits and stick to your guns.
Before you begin looking you need a to know what you can actually spend.

What's your Budget?


So you're looking for a new or new to you car? Congrats! If you're in the market for a new vehicle, you should first determine what you can actually afford. And if you're considering leasing or financing a vehicle, you should understand the total costs involved.

There are several approaches to working out your new vehicle budget.

Paying Cash
If your pockets are deep enough, Pay Cash!
 If in fact you are in a position to pay cash for your next vehicle you will have no extra money going to the finance companies.
The myth of getting a better deal if you pay cash is just that. Years ago yes, but in this day and age the banks have the money to the dealers within days, if not hours, not to mention that the banks actually pay the dealers to use their services.
This is not a huge sum but it does add to the bottom line.
There is no financial benefit to the Auto Dealers to accept cash so the opportunity to see a substantial savings is minimal.  
So why not finance at a very low rate and keep your cash? If you indeed have tens of thousands of dollars available, a savings bond or another form of investment, is a better use of your cash than an automobile.
If you still feel that cash is the best way to go you must still consider all of the costs.

Consider all of the costs involved?

List price or MSRP of the vehicle
+plus+
Options
+plus+
Documentation Fees
+plus+
Applicable Taxes
-less-
Value of Trade including tax savings (if a trade is involved)
=equals=
All in Cash Price of your new vehicle

Financing

Chances are if you are budgeting for new vehicle, you are budgeting for an auto loan.
Your primary focus should be on the monthly payments.
If you will be financing or leasing a vehicle, you'll then need to calculate your ideal monthly payments. Keep in mind that your monthly payment will include both principal and interest.
The loan term, interest rate, and down payment will all affect your monthly payment.


            If your cash flow is similar to that of the majority of the population and you have only a fixed amount that you can dedicate to the purchasing of a vehicle, including your cost of driving, than financing is your best option.

When you’ve made the decision to finance your new vehicle, your budget changes from paying the entire amount, to making instalments on the purchase price of the vehicle, plus the cost of financing. These installments are typically made monthly, bi-monthly, or bi-weekly over the course of the term until the vehicle loan has been paid in full.

Consider all of the costs involved?

List price or MSRP of the vehicle
+plus+
Options
+plus+
Documentation Fees
+plus+
Applicable Taxes
-less-
Value of Trade including tax savings (if a trade is involved)
=equals=
All in price of your new vehicle
+plus+
Cost of Financing
(Interest Rate and Term)
=equals=
Monthly or Bi-weekly installment

The cost of financing will vary greatly based on the interest rate you were able to secure.
An 
Auto Loan Calculator will help you to get budget numbers based on the interest rate you feel that you will be able to secure when you make your application for the loan. Keep in mind that you will likely get a better interest rate going through a dealership, because dealerships use multiple lenders allowing them to choose the best rate available. The banks use only their own lending department and you will often see them offering individuals higher rates.

Factor in your Credit

Unless you’re paying cash, your interest rate is a big factor in just how much new or used car you can afford. You can get an idea of the rates you’ll be offered by pulling your own credit score online at one of the free services.
Keep in mind that most of us have a very good idea of where we stand when it comes to our credit. If we pay our bills on time and have had no financial judgments against us we should be in the good to average category.  Is your credit Excellent, Good, Average or Poor?

Next, add in your car down payment. The average down payment is about 10% of the car’s price, conventional wisdom is to put up 20% or more. The value of your trade can also be considered as part or all of your down payment. Keep in mind that if you have a loan on your trade in vehicle, you may also be in a negative equity position.

Armed with this information, you can now calculate the price range you are prepared and able to pay for your next new or used automobile.