Owning a car is very important in modern-day life and circumstances. Occasionally, one may need to rush to or from the office, and unanticipated travels can arise anytime. In such situations, relying only on taxi services could be problematic.
Many people are forced to take loans to purchase a car. However, when attempting to get one, one should not go overboard and end up with a prohibitively expensive one.
Surya Vajpeyi, a social media user, has come out to explain five factors to consider before purchasing a car, adding that a car is unquestionably a depreciating asset; its value begins to decline the moment you purchase it, and a new vehicle comes with many expenses, including maintenance, parking, fuel, and other recurrent costs
- 50% Rule – The price of a vehicle must be less than 50% of one’s annual salary.
- 20% Rule – 20% of the total vehicle price is required as a down payment because longer-term loans have lower monthly payments. In addition, by extending the duration of the loan’s interest, the lender earns additional money.
- 10% Rule – Keeping your total transportation costs to less than 50% of your monthly income can help ensure that a car does not dominate your budget, leaving room for other expenses.
- Four-Year Rule – A four-year auto loan can assist you in reducing the amount of interest you pay because the loan will be paid off reasonably soon. Even if the monthly payments are lower, the longer the loan, the more interest you will pay.
- Long or Short Drive? – If you frequently travel long distances, you should strongly consider purchasing a car and keeping it for at least ten years. It comes in handy, especially in times of emergency or when time is limited.
- One should consider a sustainable source of income to repay the loan during the installation period. Those not on permanent contracts need to ensure they have other sources of income to repay so that when the job contract ends, they can continue with repayment.
