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Can I "AFFORD" to purchase a 2002 Toyota Sequoia SUV?
How Much Financing Can I Afford? It may seem simple at first to answer this question. However, "having enough money" and "affording" a vehicle can be two different things. Lending institutions have a definition of "afford" that is based on something called "debt-to-income ratio." The formula used by the lending institution that I would use is below: How much should you pay for car or truck financing? Some experts say for vehicle loan installments you should avoid paying more than 20 percent of the money you have left each month after paying all your regular expenses—rent or mortgage, utilities, normal food and transportation charges, credit card balances, etc. Of course, the more of these expenses you include, the less money you will have left for making monthly car or truck loan payments, but consider the alternative: Fudging the accuracy of your living expenses may force you to make unwanted sacrifices to keep up with vehicle payments. (A year and a half from now, will you still be satisfied not eating in restaurants or renting videos on weekends to pay for your car?) And worse, an emergency could spell genuine financial trouble. Of the various Sequoia Models available, I am interested in purchasing the Sequoia Limited 4x4 which has a price of $42,725. After adding all of the bells and whistles, the grand total is $46,252.
The total cost (with all of the option that I want) is $46,252.00. Total:
Knowing the total price of the vehicle, I now need to calculate the monthly payments. Total MSRP: $46,252 Down Payment: $10,000 Amount to Financed: $36,252 Assuming that I am able to secure a loan from Service Credit Union with an APR of %5.95 percent, I can now calculate my projected monthly payments: Interest: Total Price *( APR) (years of loan) $36,252 * (.0595)*(4) = $8627.976 Amount to be repaid: Total Price + Interest $36,252 + $8627.976 = $44,879.976 Monthly Payment: Amount to be repaid / (years of loan * 12) $44,879.976 / (4 * 12) = $934.9995 For a 4 year loan of $44,879.976 with an APR of %5.95, my minimum monthly payments on the vehicle would be a whopping $934.9995 per month. But, before I rush out and buy my new Toyota,
I need to determine if I can "afford" it by calculating my
"true" debt-to-income ratio. For most lending institutions, Qualifying
for a loan simply means you have satisfied the bank's or other lender's concerns
about your financial means to repay it. Lending institutions all use
mathematical formulas to determine your repayment capabilities. The two
methods can produce different results. "Qualifications based on your
credit report will present you with an idea of the amount you're willing
to pay, while qualification based on debt-to-income ratio will tell you what
you're able to pay."
In order to qualify for a loan with Service Credit Union, my household debt-to-income ratio cannot exceed 45%. My household Debt-to-Income Ratio will be calculated using the following variables:
Family size: 4 (2 adults and 2 children)
Conclusion References http://www.toyota.com/html/shop/vehicles/sequoia/price/sequoia_price.html http://www.delawarenational.com/calculators/budget.asp Debt-to-Income Ratio Calculator
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