Car dealerships have a reputation for making the process of buying a car extremely complicated. You'll see what I mean when trying to figure out how much a car actually costs. Then there's the advertised sticker price of a vehicle at a car dealership. The manufacturer's suggested retail price (MSRP) can then be compared from there. You might be able to work something down to the dealer's bottom line if you negotiate well. Unfortunately, the journey from sticker price to lowest price is sometimes cloaked in secrecy. And if you're not attentive, you can end up paying more for a car than it's really worth - or more than you can afford. Car dealerships may wreak havoc on your money in more ways than one. They not only make discussing pricing a strange and uncomfortable affair, but they're also great at persuading you that their new automobiles are worth ridiculous amounts of money. Keep in mind that the average new auto loan was well over $30,000 in the first quarter of this year. And the average monthly payment for a new car was $499 — for a period of 68 months! These figures are ridiculous when you realize that the median household income in 2017 was only $59,039. If you already know what you want, use our Car Affordability Calculator to figure out how much you should pay and how much you should spend. PLUS, we'll tell you how this will affect your retirement!

**Four Steps to a Budget-Friendly Monthly Payment**

Whether you like it or not, determining how much you can afford to spend on a car is your responsibility. Whatever you do, don't let your salesman determine how much money you can borrow.
Why? Because your credit and salary may qualify you to buy just about anything on the lot, according to their numbers.
Lenders and major banks do not determine true "affordability." After all, only you know how much money you have to spend on transportation and other expenses.
**So, how do you figure out how much money you have to work with?**

**Step 1:**Determine how much money you make per month. If you don't already have a budget, you might not be aware of how much money you make each month. It is a necessary step before deciding on a vehicle payment. Take out your pay stubs and total up your usual earnings in a typical month. This portion is simple if you receive the same amount of money every few weeks. On the other hand, if your salary fluctuates, you may need to estimate your average income based on several months' worth of pay.

**Step 2:**Take your revenue and subtract your costs. It would be best if you also totaled up all of your monthly expenses after you have a handle on your revenue. What do you usually do with your money? Make a list of all of your fixed expenses (rent, insurance, television, phone, internet, and so on) and estimate your variable expenses (utility bills, gas, food, etc.). Finally, you should set aside some money in your monthly budget for savings. Isn't it true that you should be if you're not saving money every month? Compare your income to your costs once you've totaled your monthly spending and savings targets. Every month, how much money do you have left over?

**Step 3:**Calculate gas and insurance costs. Will the cost of insurance and petrol increase or decrease if you purchase a newer vehicle? If modifications are expected, make sure to include them in the simple budget you generated in steps 1 and 2. Here's an illustration: Let's imagine you make $1,000 every payday, for a total of $4,000 in take-home money per month. When you sum up your spending, you'll see something like this:

- $1,200 per month in rent
- $600 for food
- $80 for cable and internet
- $100 for gas
- $80 for car insurance
- $250 in utility bills
- $200 for health insurance
- Childcare costs $600.
- $400 in savings
- $3,510 in total

**Step 4:**Use a vehicle payment calculator to figure out how much you'll have to pay for your car. After you've gotten a sense of your monthly income and expenses, play around with a loan calculator like the one below to obtain more insight. Enter the pricing range you want to shop in and the interest rate you're hoping to get. From there, you can figure out what kind of monthly payment you'll have. Let's imagine you're interested in purchasing an older Toyota Corolla hybrid from a nearby dealership. They're asking $21,000, but you're hoping to get it for $20,000 off the lot. You can experiment with different circumstances by playing around with a loan calculator. For example, if you financed $20,000 at 5% APR and paid off your automobile over 60 months, your monthly payment would be $377.42. Maybe you put up $3,000 for a down payment and wanted to pay off your loan in four years rather than five. If you borrowed $17,000 at the same rate for four years, you'd repay $391.50 every month. When buying a new or used car, there are a few things to keep in mind. While the following recommendations can help you figure out how much car you can afford, that amount should not be your final budget. You should try to spend less on a car than you can afford if you want even more flexibility in your monthly costs.