How do I budget for a used car? I am on a SSD from Social Security and my monthly income is under $900 a month. Any tips? My rent is $220 a month. I plan to spend approximate $2,000 for down payment. Thanks for any advice/help.
By Rae B. from Denver, CO
You will have to figure out what you spend for rent, untilities, food, and other necessities. Then figure out what you spend for other miscellaneous items, such as eating out(even fast food, a cup of coffee, magazines, etc.) See what you can cut out, and save that towards the car. However, I haven't had a car since 1997. If a person limits their trips, it is cheaper to take a cab, providing you are careful about where you are going. If you have to go more than a mile, maybe you could offer a friend or neighbor a few dollars for a ride. If you are disabled and qualify for the service, providing your town has it, you could ride something like a paratransit service. You don't have to be in a wheel chair or anything in order to use those services. Where I live when you use the paratransit service you do have to plan at least one day ahead for a ride. When you have a car there is more than just the payments, you have to have insurance and until it is completely paid off you have to have complete coverage, there is gas(which is getting higher almost daily,) then there is tires, oil changes, and general maintenance. There is a lot to think of besides just having a car. I quit having a car in 1997, because of the expenses involved with operating it.
I would as a preliminary scout out places where the used car prices are low. For ex. 90 min. N. of L.A. in Ventura Co., used cars are MUCH cheaper than in the city. Also check with your local mechanics to see if they have any cars they would like to sell. (My mechanic has been fixing up cars to sell on the side.) Know that if you get a used car, you have periodic repair costs! Save by getting used tires & finding a good budget mechanic. Know that is you keep your older car (with high gas mileage) for over a year, you can get $1500 back from the gov't for turning it in to be crunched! So- you could have a $2000 car a year & then dump it & only really spend $500 on it!
I thought the cash for clunkers expired several months ago.
You would have to list all your monthly expenses for us to help you with that such as your food, utilities and everything.
First, you would need to save the amount for the car, but then you also need to research what you would spend each month for fuel, insurance, maintenance, parking....also you will need a car emergency fund for repairs that are not routine maintenance.
As low as you listed your income, it may not be feasable for you to have one, unless you also have other income or possibly your food and utilities are already covered by another source.
I too am disabled and was Blessed to already have a completely paid for car when I became ill but it still costs quite a bit of money for basic liability insurance (I have a perfect driving record so I get the lowest rate) and gas a month. I factored regular maintenance like oil changes, air filters, etc into the monthly expense too. However, this past Fall three of the electronic windows failed and would not go back up and the cost just to put the two rear ones back up and disable them plus repair the drivers window so it would go up and down was just under $1,000.00! Were it not for the charity of family and friends I would have had to cover it in heavy plastic and house it somewhere or sell it. My point being that you are bound to come up with large unexpected expenses.
The best thing to do is research how much your insurance will be, how many miles you plan to drive per month and how many gallons per mile the car uses to calculate how much your gas bill will be a month (taking into consideration the prices are going to go up and up), and how much oil changes, etc cost and how often.
Personally, I would wait until you have the cash on hand to buy the car outright or else all of the combined costs along with a payment most likely will get you in hot water and you could end up losing the car via repossession and will have wasted the money put into it.
Also, it was mentioned to purchase used tires to save money by another poster but if you do alot of highway driving that is a big no no! There is too large of a risk of blow out from retreads and even so called new tires that are unused but are over six years old are dangerous (you can google about tire age and safety to find out more).
If you have anymore questions you can click on my contact button to ask and I'll be happy to help.
Also, don't forget to add what the car will cost you yearly in personal property tax, if applicable in your state.
Susanmajp, I am confused. I've never heard of having to pay yearly personal property tax on vehicles. Do you mean the yearly vehicle registration fee that's based on the value of your car?
Anyway, Rae, the yearly vehicle registration is another yearly cost you need to keep in mind that none of us have mentioned here yet.
If you can put aside the ego thing about having a "nice" car you will be a lot better off to use that $2000 down payment to buy an older, small. car in decent condition from an individual outright. When I retired I bought a 1994 toyota tercel for $2000. In the 54 months I have owned it I figured the difference in what I have spent driving the 90,000 miles I have put on it over what it would have cost me to drive my truck for that distance. I have a truck which gets 13mpg vs. toyota which gets 46mpg. Figuring the cost of all repairs,insurance, tires, gas savings etc I have saved over $12000.00 by paying cash and driving that car instead of my gas guzzler. That figures out to a "income" to me of $230 per month. That does not even take into consideration if I had been making a car payment. Add another minimum of $300-400 a month for payment/insurance if you are buying even a used car on credit. Not a bad return for someone on a low fixed income. Also the chances are with that low an income the only people that are going to be willing to sell you a car are one of those buy here/pay here dealers and they charge a terrible finance charge and only have cars that car dealers auction off as unfit to sell on their used car lots.
You need to realistically sit down and figure out how you can possibly pay $500-600 a month for car payments/required insurance/gas/tires/repairs, etc on a $900/month income. It seems to me an impossibility. That would leave you a total income of $300/mo for rent/ food/utilities/meds/etc. It sounds like you need to drastically downsize your expectations of what you are going to be able to afford.
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