The Tried and Tested Rules of Car Investment

Take it for granted; you will face a lot of issues while buying your first car. One of them, and the most crucial, is the amount you would like to spend on transportation. If confused over the topic, you can check out the three major guidelines of car investment.

The adjustment method

As per this method, you will be spending around twenty percent of your annual income on your car. The method is a reliable practice which not only guarantees a new car but also saves you from spending unnecessary money. As per this method, you are not conserving too much neither you are buying an expensive car you certainly don’t require.

Thus, you get sure about the class of vehicles you can afford with the given amount. Also, you will be saving a lot on the interest paid over car financing and also on the expenses required to maintain an old car.

You can term this method as a sustainable approach towards our desires, yet it is not valid for every person. You might have different liabilities that need to be settled before one-fifth of your income is invested in a car. In this way, you should acknowledge your priorities before visiting the nearby car showroom.

The prudent method

Also known as the frugal rule, the method asks you to spend only ten percent of your annual income over a vehicle. For most of us that would mean an old car bought on discount. Even though this method is not concerned about the comfort and experience of a brand new car, yet, it cannot be completely overlooked.

A car is considered to be a liability than an asset. It means that we have to incur extra money to maintain our vehicles which escalate with time. Thus people who do not have ample money to buy a new car or just don’t want to waste their money over new accountability can get comfortable with this method.

You can buy a used car, drive it for a few thousand miles and resell it to buy another one. That way, you will save money while using personal transportation for travel.

The upscale method

This method allows you to spend thirty-five percent of your annual income on a car. By using this approach, you will be able to buy a new car or an old lavish car, not easily but certainly. It all depends on your earning capability, as a person with a handsome income can buy a high-end vehicle with this method, and a person living on daily wages can also purchase an old one.

Only you can decide if this rule fits your budget and future planning. If no, then you can hover over a midpoint between these three methods. We would advise you to pick a number that would be rational with respect to your reality. There is no smartness in buying a luxury car if it haunts your account, whereas buying an old car full of issues is not wise either.