Setting a Budget
Buying a used car can easily turn into an impulse purchase – this is NOT how to buy a great used car. Come up with the cash or find out your FICO score and determine what monthly payments you can afford.
Don’t forget the sales tax – that’s easily 7% or more and the fees to register the new title. Insurance can be a large component of the initial costs and recurring costs. Before you can get license plates/tags you MUST pay the state sales tax- don’t buy a used car and have no money left over for insurance and taxes.
Two things will tell you what’s in your budget – cash in hand if a cash purchase or FICO if a financed purchase. Its been my experience that every used car I buy is just outside my budget – funny how that always happens. If you need to finance the used car then you MUST find out what your monthly payments will be and that has everything to do with your FICO score.
FICO and car payments: $10,000 36 months:
FICO ………………APR ………Monthly payment
720-850 6.000% $304
690-719 8.040% $314
660-689 9.000% $318
620-659 12.485% $334
590-619 16.726% $355
As you can see your FICO score makes a HUGE difference in your monthly payment – find out your FICO score and double check the bank’s monthly payment. This is a BIG deal and don’t rely on the finance guy at a car dealership to get it right – verify it yourself.
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