5 signs you can't afford your car, even if you can get a loan

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• Just because you can get a car loan doesn't mean you can comfortably afford it.
• If you're not saving for the future or your car loan makes it hard to keep up with your bills, it's likely you can't afford your car.
• It's up to you to look at your car loan within your broader finances and figure out what you can truly afford.

Buying a shiny new automobile may make you feel on top of the world, but your new ride could cramp your style more than you think. The average new car payment for prime borrowers worked out to $552 in Q4 of 2018, according to Experian's State of the Automotive Finance Market study.

The new car loan amount? A whopping $33,518 for prime borrowers - and a record high. That's a ton of money to spend on transportation, and let's not forget the cost of maintenance, repairs, gas, and insurance.

That's probably why so many borrowers default on their auto loans. While default has always been a problem, Experian reports overall delinquencies on car loans trended upward late last year, albeit mostly in the subprime market. With car payments eating up more and more of the family budget, it's easy to fall behind.

If you have a newer car and your loan amount or monthly payment is already a problem, it's possible you're in over your head. Here are some signs you can't afford the car you have - even if you qualified for a loan.

Your monthly payment exceeds the 'wealth killer formula'

Financial advisor Jeff Rose of Good Financial Cents suggests a simple "wealth killer formula" to determine whether a car payment makes sense.

If your car payment is greater than how much you save and invest each month, he says, "then you're on a path of staying broke."

Using his formula, if you have a new car with the average payment of $552, you should be saving and investing at least that much every month.

You don't have any emergency savings for upkeep or repairs

Your car payment is only one piece of the puzzle when it comes to transportation costs. Ryan Inman, a San Diego-based financial planner for physicians, told Business Insider it's crucial to have emergency savings to cover every aspect of owning a vehicle, including expenses like gas and insurance.

If you don't have money set aside for unexpected expenses and repairs like new brake pads or a new set of wheels, you're setting yourself up for disaster.

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You're using credit cards to keep up with regular bills

If your car payment is so colossal you must use credit cards to keep up with bills and living expenses, this is also a bad sign for the future, said Inman.

Using credit to stay afloat "will put you further into debt on top of the debt you took out for the loan," he said. Keep in mind, the average credit card APR is well over 17%.

While it may be too late to get out of the car loan you have, Inman suggests saving up a bigger down payment in the future to lower your monthly payment or spending less on your car all together.

Your car payment is late (or almost late) every month

Inman also warns that paying your monthly payment beyond your due date means you have a huge problem. Not only is it a sign your car could be the culprit of your money woes, but you will likely wind up paying late fees.

Worse, late car payments will be reported to the three credit bureaus - Experian, Equifax, and TransUnion - resulting in a ding to your credit score.

You extended your car loan beyond 60 months

Where 60-month car loans used to be the norm, higher auto prices have resulted in longer auto loans over time.  Experian notes the average new car loan now lasts over 69 months for prime borrowers and even longer for non-prime, subprime, and deep subprime borrowers.

Inman points out that many people extend their car loans to lower their monthly payment without realizing they will pay more interest over time. Borrowers also use longer and longer repayment timelines to buy expensive cars they couldn't afford otherwise.

The bottom line: If your car is so expensive you need to pay it off over 72 or even 84 months, you are spending more than you should. A lender may grant you a loan regardless, so it's up to you to draw the line - and stick to your guns.  

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