Here’s why so many people have Car Payments they cannot afford

For a lot of people, owning a car is anything but cheap. The average auto loan payment comes in at about $500 per month. And auto loan delinquency is higher now than it has ever been before. These facts have some industry analysts worried that there are some serious long term financial issues that may arise because of car loans that consumers simply cannot afford. It may be tempting to blame the bank, financing company or the dealer if you are stuck with a car payment you can’t afford to pay, but those parties may have little to do with this situation.

Experian released a report recently that found that American consumers are borrowing more, leasing more and taking out longer term loans for their cars. These are not bad things in and of themselves if consumers are smart about how they manage their finances. But, since loan delinquency rates continue to increase, it looks like there are quite a few car buyers out there that may be biting off more than they can chew when they make the decision to get a new ride.

People need to start off the car purchasing decision by choosing cars that are suited to their current financial scenarios. Some experts are strongly against consumers ever leasing and some even say that purchasing a new car is a bad idea for just about everyone. The important thing to remember is that every person’s financial circumstances are different, so they have to find a financing option for their car purchases that is going to work for them down the road.

Dealing with a too-expensive car payment really boils down to this – unless you had to deal with some major situation that wiped out your income, and you still have a car payment that is too much to afford then you probably didn’t map things out properly prior to purchasing your car. It is easy to get excited about the prospect of getting a brand new car. All of the great features and the feeling of having something new can be almost intoxicating. That new car excitement will wear out, though, and you still have to make those big payments for years to come. You won’t feel good several years down the road if you are stuck driving something that is slowly killing your finances.

Just because you want a particular car that doesn’t mean that you can reasonably afford it. Prior to making the very big decision of buying a new automobile, you should take time to go over your finances with a fine tooth comb. Do not make the blunder of simply “shopping around” at a dealership and think that you are going to miraculously be able to afford the most expensive car on the lot. And you don’t have to be a math wizard to make the right decision either. Use a calculator and be honest about your income and expenses. Pay close attention to how much money you bring home after taxes because that is the bottom line number that will determine what kind of a car payment you can reasonably pull off.

Once you determine your take-home income, subtract things like mortgage payments and utilities. Don’t forget credit card payments, student loans and other debts. Then subtract how much you typically pay for groceries and gasoline every month. By now things are starting to add up and that car payment that seemed like something that you could easily afford may begin to look a little beyond your reach; at least for the time being…

Even if you have bad credit, you can probably get a car loan. But don’t be naïve in your approach. Know exactly how much you can afford to pay every month and stick to your guns. If you wind up with a car loan that is sucking you dry every month, that means that you didn’t take the time to budget accordingly, so you cannot blame anyone else for the fact that you’re driving around in a car that you realistically can’t afford.

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