While the average price for a brand-new car this summer was $48,401, the tally was north of $100,000 for luxury and full-size SUVs.
It’s one thing if you have the finances to buy a vehicle. But it’s another thing if you stretch yourself too thin. Some people are house-poor because they allocate too much of their total income to homeownership. However, others are car-poor because they spend too much of their total income on car ownership. No matter how you look at it, both can be a recipe for disaster.
Don’t Be Car-Poor
According to LendingTree, the average monthly payment for a new model is $734, up 0.1% from a year ago. Meanwhile, the average payment for a used model is $525, down 2.1% from a year ago.
Consider Car Ownership Costs Before Buying A Vehicle
According to AAA, the annual cost of new vehicle ownership is up 5% year-over-year to $9,282, which translates to $773.50 monthly. So, the last thing you should do is think that the monthly or bi-weekly car loan payment is all there is to worry about. It’s only one part of the car ownership package.
If you’ve recently bought a new or used vehicle and feel the financial pinch, you might have bitten off more than you can chew.
Here are 13 signs you can’t afford your car.
You’re Missing Payments
One telltale sign is that you can’t afford the car in your garage or driveway if you start missing payments. The last thing you want is for your vehicle to be repossessed, so you must keep up with car loan payments. There’s only so much the lender will tolerate before it takes actions you may not like.
Your Car Feels Like a Burden
Another sign you may have made a mistake buying your car is if it feels like a burden. Few things are as uncomfortable as having an albatross around your neck that weighs you down. If you get a sick feeling in your stomach every time you look at your car, it might mean you can’t afford it.
You’ve Eliminated Other Necessities
Yet another sign you can’t afford your car is if making monthly payments means you have to slash other necessities from your budget. Cutting back on food, other bills, and even healthcare should be a warning sign.
You’re Regularly Borrowing Money
Do you regularly have to ask family, friends, roommates, or neighbors for loans because of money shortages after car loan payments? If not, do you rely on high-interest payday loans? If you answered “yes” to either of these questions, your car might be more of a problem than you’d like to admit.
You Want to Refinance Your Car Loan
If you want to refinance your car loan, that’s an admission that the original loan was unaffordable. It’s best to do your due diligence before entering any loan.
You’re Using Credit Cards for Vehicle Repairs
One source notes that total credit card balances in the U.S. totaled $1.142 trillion in the second quarter of this year. Falling behind on credit card bills is a quick way to get into trouble. And it can happen faster than you think if you rely on credit cards to fund car ownership expenses. Buying a car you can’t afford might force you to rely on your credit cards more than you want.
You’re Living Paycheck to Paycheck
If too much of your income goes toward car loan payments and other car-related expenses, you may be living paycheck to paycheck. That can make things difficult since you might lack the finances to tackle any emergencies that arise.
You’re Skipping Routine Maintenance
Routine car maintenance is necessary if you want your vehicle to function correctly. But it’s a red flag if you’re putting so much money into car loan payments that you don’t have the funds for things like oil changes, brake servicing, and other essential services. Delaying maintenance can eventually result in costly repairs.
You’re Withdrawing Money From Your Emergency Fund
Bankrate’s 2024 Annual Emergency Savings Report shows that 27% of adults—almost three in 10—say they have no emergency savings. You’ll want to be among the majority with at least some money in an emergency fund. But even if you have six months’ worth of expenses in a rainy day fund, you’re in trouble if you have to use it for car expenses.
You Get Stressed Out at the Fuel Pump
Are car ownership expenses so high that you get a headache when you go to the gas station? If so, your car might be a problem. Selling the one you have and getting a cheaper one or selling any excess vehicles might be what you need to right the ship.
Your Car Loan Is Stretched Out Too Long
If the only way you can “afford” a car loan is by signing an 86 or 92-month contract, you most certainly can’t afford the vehicle. You should be able to pay off a car within three, four, or five years.
You’re Struggling With the Insurance Costs
Buying an expensive car could mean paying an insurance premium that you might not be able to afford. So, doing your homework before signing your signature on the dotted line is best.
You’re Skipping Trips Because of Fuel Costs
Are you skipping outings due to fuel costs? If car ownership costs start to get to you, the car might sit in the driveway more than you’d like. It’s one reason to assess whether you can afford to hold onto the vehicle or if it would be better to get something more affordable.
These Are Some Signs You Can’t Afford Your Vehicle
Life’s hard enough as it is. You don’t want to make things worse by buying a vehicle you can’t afford. Consider these 13 scenarios and see if you can relate to any of them. If so, you may have to ask whether the vehicle in your driveway or garage is a blessing or a curse.
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