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Seriously contemplating the purchase of a new auto in this economy can be a bit scary. Knowing exactly how much you can afford is the single most important question. There is a plethora of excellent deals on the market, but does it make sense to take on another payment right now? Make a checklist of the pros and cons before saying yea or nay.

Do you have secure employment? Many who thought they did have found out in the worst way that the company in which they worked for 30 years–and planned to retire from–is suddenly downsizing. Be sure that the money you plan to expend on a monthly car payment will not overtax your bottom line in the event you become unemployed. Budgeting is easier to do when you know exactly how much money you make every month. Always be sure to leave plenty of cushion after your other payments have been deducted. It is not easy to save, but it truly is better to be safe than sorry.

Is your reason for wanting a new or used car strong enough? There are many reasons for needing to trade up–or even down. If your current ride has a number of issues that will cost much more in the long run to keep repairing, then certainly trading up is a very good reason. Conversely, if your vehicle is a high-end model and the payments are too steep along with the insurance payments, selling it outright or trading in for a more affordable model makes sense to reduce debt. If you have no car at all and you desperately need one, saving up for a few months to buy a decent used auto is a good way to purchase one without having an unwieldy payment hanging over your head every month. In addition, if you have recently been in a wreck, search for an auto with approximately the same terms as the previous unless you know without a doubt you can afford more. Buying up just for the pure enjoyment of having a new car does not make the most sense if you barely cover your current expenses.

The rate of interest you get is contingent upon your credit rating and the loaning entity. Currently they run anywhere from 3.99% up to 12.99%. Many banks have up front application fees and require a down payment in order to give you a lower rate. The bureau of motor vehicles in your state may charge a title transfer fee in addition to the excise tax for your license plate, and in some states the amount they charge is relative to the value of the auto you purchase. Insurance premiums are another consideration and cannot be overlooked when figuring your out-of-pocket expenses to purchase a vehicle.

Now may be the best time to purchase if you are in a solid job with extra cash to spend. However, it may be wiser to save up and purchase with cash rather than take on a payment for 36, 48, or 72 months. Signing an auto loan is a serious commitment that requires some serious consideration. Failing to meet your financial obligations can cause grave consequences to your good credit standing. You may decide it is best for you to stay out of debt at this time.