How Much Can I Afford for a Used Car Loan

Posted Monday, Feb 22, 2021

There are many factors to consider when buying a used car. Many people have an idea of the vehicle they’d like to buy and then figure out if they can afford it. Others tend to look at what they can afford and figure out what they can buy. What you can get for your used car loan is essential to know right away when buying a new car.

But, by getting a loan people realize they can afford much more than they thought possible. However, there are some factors to consider when making a wise financing decision.

Affordability Factors for a Used Car Loan

First let’s talk about lenders. Traditional lenders are salesmen who seek you out when you pick out a vehicle on a lot and then sit down to negotiate terms. The salesman will pass your information to a third-party lender.

That lender determines qualification, length of term, and your monthly payments will be made to them. These lenders are financial institutions who set the rates and accept or deny your request for funds.

But… If you happen to be with a dealership that is a little more on the shady side, the dealer may get the interest rate offered by a lender and inflate it a bit with you and keep the difference as compensation.

With the Buy Here Pay Here model, you pay directly to the used car dealership where you found the vehicle.

Payments at a Buy Here Pay Here may be weekly, bi-weekly, or monthly – it all depends on what you work out with the financier.

They determine the loan amount and will show you cars that fit your price range. Traditional dealers do the opposite. Since they don’t talk finance until you’ve already picked out a vehicle, they’ll typically show you the most expensive vehicles first.

Buy Here Pay Here dealerships often don’t run a credit check so those with no credit or low credit won’t have a problem. They fund loans based on income and proof of residence so loans are relatively easy to obtain. There are other benefits to using a Buy/Lease Here Pay Here model too - especially at City Wide Motors.

You can usually have a lower down payment than at Buy Here Pay Here’s too. The average down payment has varied over the years from 9% to 20%! Current recommendations are advising consumers to put about 10% down for a used car. A down payment (even on a used car loan) can significantly help reduce your monthly payment, get you a better interest rate, and offset depreciation.

Most traditional lenders have you locked into long term vehicle financing, that means no matter what happens, you must pay that loan back within the time allotted. City Wide Motors has a two-year average with their Lease Here, Pay Here model.

This means if you want, you can drive a new car about every two years! That way if your life changes your vehicle can change with you.

Did you change to a higher paying job or receive a raise? You may want to upgrade your vehicle! Did you lose your job or have surprise medical problems? Trade your vehicle in for a cheaper ride. At City Wide, we adjust with you and have creative ways to keep you running.

Buying a used car can be much easier than you think, even with financing. Figuring out what you can afford in your budget is the first step. By creating a budget, you can get a good grasp on your income and expenses and accurately determine how much you can afford for a used car loan.

First, make a list of your net income. Your net income is your take-home pay or income after all federal, state and local taxes have been paid as well as insurance, retirement, and other deductions. Basically, this is the amount you have in hand each paycheck.

Once you have your net income calculated, make a list of your expenses. Don’t leave anything out! To make it less overwhelming, break them up into categories such as:


Fixed Expenses – These are expenses that don’t change per month and consist of thinks like house or rent payments, city service fees, fixed-rate loans, etc.

Fluctuating Expenses – These expenses can change each month depending on usage. For example, your power bill, phone bill, gasoline, etc.

Flexible Expenses - These are things you might be able to adjust if needed like your groceries, dining at a restaurant or other entertainment, cable TV package (because who really watches all 250 channels?)

While going through the steps to find out your preferred monthly expenses, it’s important to keep in mind some of the extra costs you will take on when applying for a used car loan.

The good news is if you have a vehicle in mind, you can anticipate the extras by doing a little bit of research. Plus, at City Wide Motors, we have a fantastic Used Vehicle Protection Plan that features a limited powertrain warranty and free oil changes for the life of the lease.

Extra Expenses

Gas - Check out the miles per gallon of the car you are interested in and compare it with gas prices around your area.

Registration – Call the Department of Motor Vehicles or look up the car on your state’s DMV website and find out what the yearly registration fees are.

Maintenance – Get a rough estimate on oil changes, tires, rotations, etc.

Insurance – Contact your insurance company and a few others to get quotes and requirements. Some companies may require you to purchase full coverage if the vehicle a certain age.

Repairs – Search your vehicle of interest and find out about any recalls, find out about complaints and problems from other owners, and even call some mechanics to get their advice.

All of these can add up and affect what you really are comfortable paying per month for your vehicle. After you have your target monthly payment, we suggest using an auto loan calculator to determine the price range of vehicles you can afford.

There are several calculators online but a simple one is the easiest to understand and give you a cleaner picture of your price range.

Wouldn’t it be great if you had someone to help you through all this?

At City Wide Motors we go the extra mile for our customers. We will sit down with you and talk about your dream car, your budget, credit, and needs.

Not only that, but we have some pretty cool perks!

With our financing capabilities, we can help you map out a plan and get you into your preferred vehicle. Just fill out our quick get started form and a team member will reach out to discuss all the options available to you.

Our mission is to “Accelerate Your Future” and help you drive your dream. We work with all types of scores and situations and cover your tags, taxes, and title fees. From the moment you contact us to the end of your term, we are with you every step of the way.