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Dreaming about having a car of your own will bring in the question of having a cheap car loan. There is little estimation that you need to evaluate before applying for a car loan. Your estimation needs you to calculate how much you can make a down payment and how much you can spend every month if you are granted the loan. Basically you need to create your own income-expenditure balance sheet in order to decide on the expenses. This entire process is a step by step evaluation. You need to calculate your total monthly expenditure including the debts, rent payments or mortgage if any, groceries, insurance, clothing and other expenses etc. As per the thumb rule is concerned, your monthly payment for your car shouldn’t exceed more than 20% of your net income per month.

Regarding calculation of monthly income you need to include expenses related to your car; for instance a rough estimation of the fuel costs per month depending upon how regularly you use your car, license, insurance and registration costs should also not be excluded. The entire cost estimation can vary depending upon what car you’re buying; in case you buy a brand new car your estimations are supposed to go higher but not much as in the case of buying an used car. It all depends on what you want. You will need to upgrade your vehicle time and again if you opt for a used car which again should be included in the expenditure account. A new car will get you to cruise for a few good years before you upgrade it.