At Heidebreicht, our goal is to make customers for life. We aren’t interested in just making a sale and moving on. After all, we live in Macomb County. Our customers are also our neighbors. We want to make people excited to join the Chevy family, and for that to happen they have to be able to trust us with one of the biggest purchases they make. Our sales team works to ensure everyone who walks out with keys gets the vehicle they need for a price they can afford.
Deciding how much you can afford for a new car can be tricky. There are so many conflicting “rules of thumb” floating around the internet: ten percent of your monthly income, one fifth of a year’s salary, half of your post-rent paycheck. It’s hard to know what to believe. Some people get overwhelmed and skip this step entirely, risking falling behind on payments that are way out of their budget.
In situations like this it’s best to trust an established, impartial group like Consumer Reports. Their financial experts recommend that your total debt payment be no more than 36% of your income. “Total debt payment” includes your mortgage, credit card bills, and anything else you pay by regular monthly installment. You should include your rent and student loan repayments but not your power bills or cell phone, since those can change month to month. Add this amount up, then subtract it from your total yearly income to find out what you can spare per year for a new vehicle.
Let’s look at an example. Sharon, a recent University of Michigan graduate from Sterling Heights, has just landed an engineering job with an annual salary of $47,000. She knows she’ll be working late hours at first and would like to have the safety features of a new Chevy Malibu, but she’s not sure if it’s in her budget. Thirty-six percent of her income is $16,920. Sharon has a monthly rent of $800 and $400 on her credit card. That makes her total debt payment $10000, giving her a possible $6920 or about $576 per month to put towards a new car.
Now that she knows how much she can afford, Sharon wants to know if the Malibu falls in that price range. She checks our new car listings online and finds a car she likes for $23,270. We offer an easy-to-use Car Payment Estimator on our website which will calculate the total purchase price for a set monthly payment (or the monthly payment on a set sticker price). Sharon types in her maximum monthly payment, $576, and sets the term of loan for the standard 60 months (five years). The calculator will fill in an interest rate of 4.9%, though this is only an estimate. Your credit score can make this higher or lower. The calculator tells Sharon her maximum purchase price is $31,596. She can easily afford her Malibu, and now she knows she can upgrade to a higher trim level without reaching her maximum total debt load.
What can you do if your maximum monthly payment won’t get you the new car you want? A used car won’t break the bank, and since our vehicles are Chevy Tough you will still have a safe, reliable ride. You could also consider leasing a vehicle. Leases have a significantly lower monthly payment. You can negotiate for a purchase option when your term is up at a lower sticker price.
Why not get pre-approved for your car loan? Contact our loans department in Washington, Michigan today!
