Video: How much car can you truly afford?
Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada
For many of us, buying a car is the biggest purchase we’ll make, second only to buying a house. So, before you visit the dealer’s showroom, decide in advance how much car and loan you can truly afford.
Think beyond the monthly payments.
Look at the full cost over the term of the loan, interest included.
(SHORTER loan = LESS interest
LONGER loan = MORE interest)
Why? Well, stretching your loan over more years may help lower your monthly payments, but it may also tempt you to buy a more expensive car. Remember each year you add to the loan, means more interest paid on an asset that will lose value over time.
So, while it’s not as much fun as visiting showrooms, take the time to write up a budget. Establish what you can afford to pay per month for a loan, and what you are prepared to pay in total, including interest, maintenance and insurance.
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