How much car can you afford?

When it comes to buying a car, it may seem straight forward. You know what kind of car you need. You know what make and model you want. But, what about the price tag? What really goes into buying a car and how do you know you're ready for the financial commitment? Use our tips to help you find a car (and payment) that leaves room for other important financial goals, too.

First, it’s important to understand the cost of buying a car. If you’re like most Americans, you’ll likely finance the purchase by taking out an auto loan. Review a few important pieces of your payment below:

• Total loan amount: Your loan amount will, in most cases, reflect the total cost of the car. But, if you’re able to make a down payment or trade in another car, this amount will go down, making your monthly payment more manageable.
• Term: How many months will it take you to pay off your loan?
• Sales tax and registration: Don’t forget to factor these costs into your price tag.
• APR: Your annual percentage rate reflects the interest rate you’ll pay over the course of the loan term per year.

While you may understand what goes into your car payment, don’t neglect the other costs that come along with car ownership. Depending on the car you choose, your car insurance could be another impactful monthly payment. There’s also gas, maintenance, emergencies and possibly additional protection to plan for. Have a good understanding of how many miles you drive in a year and consider a fuel-efficient or electric vehicle if gas costs are a concern.

Adding another monthly financial commitment means you need to first take a close look at your current finances. Take time to track spending and consider your credit score. Ask some of these questions to begin the planning process:

• Do you have room in your budget to add a monthly cost? Or, do you need to make changes to your spending behaviors to build in a new recurring payment?
• What’s your credit score? Will your score negatively or positively impact your interactions with a lender?
• What other financial goals do you have planned for the year? Can you still achieve those with this new payment?
• Spend time experimenting with an auto loan calculator. What loan amount still allows you to meet other important financial needs?
• Contact Thrivent Credit Union to be pre-approved for a vehicle loan that fits in your budget, before you start shopping.  This will help you hold true to your financial goals before you hit the dealership and make your purchase transaction go smoothly with your financing already determined.