Buying a Car This Summer? Start With Your Budget

Whether you're replacing a vehicle that's seen better days or upgrading for a growing family, buying a car is a major financial decision. It's easy to start by browsing vehicles online or stopping at a dealership, but taking time to understand what you can comfortably afford can make the entire process less stressful.

“Aside from the monthly payment, there are upfront and ongoing costs that impact your budget,” explains Tangy Hackleman, Consumer Underwriter at First Mid. “Insurance costs can vary significantly from vehicle to vehicle and driver to driver. Also, since it’s not a regular purchase, people may not realize the added costs of taxes, title, license, and documentation fees to get your car on the road.”

Starting with your budget—not the car—can help you narrow your options and avoid surprises.

 

One of the easiest ways to set a realistic budget is to get pre-qualified before you start shopping. Pre-qualification can help you understand a potential loan amount and estimated payment range so you can focus on vehicles that fit your budget instead of falling in love with one that's out of reach. 

Your interest rate plays a significant role in your monthly payment, so knowing your financing options ahead of time can help you shop with confidence. "Getting pre-qualified before you shop helps you focus on vehicles that fit your budget and can make the buying process much less stressful," reminds Hackleman.

First Mid offers a simple, no-obligation pre-qualification process that allows you to explore available options before you shop. When you’re ready to take that step, be prepared to provide personal information like birthdate, social security number, and income details, along with a general idea of how much you plan to borrow.

It's also a good idea to check your credit score regularly. Understanding your credit score can help you prepare for a loan and support other financial goals in the future. 

 

 

The monthly payment is only one part of the cost of owning a vehicle. Fuel, insurance, maintenance, taxes, and registration fees can all affect your budget.

As you consider your options, think about how you'll use the vehicle. How much do you drive each week? Would better fuel economy make a difference? Is an electric or hybrid vehicle worth considering? Looking at the full picture can help you choose a vehicle that fits both your lifestyle and your budget.

 

 

Many financial experts recommend using the 20 / 4 / 10 Rule as a starting point: 

• Put at least 20% down
• Finance for four years or less
• Keep total vehicle expenses below 10% of your gross monthly income

For example, if your household earns $6,000 per month before taxes, total transportation costs—including loan payments, insurance, fuel, and maintenance—would ideally stay under about $600 per month. 

Helpful Tip: Keep in mind that this is a guideline, not a hard rule. Every household has different financial priorities, and today's vehicle prices may require some flexibility.

 

 

Insurance costs can vary significantly depending on the vehicle you choose, driving history, location, and coverage levels. Two vehicles with similar purchase prices may have very different insurance premiums.

You'll also want to budget for registration fees, vehicle taxes, and annual renewals.

Helpful Tip: Before purchasing a vehicle, request an insurance quote. Knowing those costs upfront can help you avoid surprises later. 

First Mid Insurance Group can help drivers compare coverage options and find protection that fits their needs and budget.

 

 

The purchase price is only part of the cost of owning a vehicle. Whether you choose a gas-powered, hybrid, or electric vehicle, ongoing expenses can have a significant impact on your budget.

Fuel or charging costs, tires, brakes, routine maintenance, and unexpected repairs all add up over time. If you're considering an electric vehicle, be sure to factor in charging costs and whether you'll need access to a home charger or public charging stations.

Different vehicles come with different ownership costs, so it's worth researching fuel efficiency, charging requirements, maintenance schedules, and repair expenses before deciding. For example, replacement tires for a large SUV or performance vehicle may cost significantly more than those for a compact sedan.

Helpful Tip: Benefits such as roadside assistance, safe-driving discounts, fuel rewards, or membership discounts can help lower ownership costs and provide peace of mind.

Some checking accounts, including First Mid Benefits Checking, include features such as 24/7 roadside assistance for towing, lockouts, flat tires, and battery service.

 

 

Hackleman recently helped her sister shop for a vehicle and saw firsthand how ownership costs can affect a decision.

"She found a used SUV she loved, but after looking closer, we realized it required premium fuel, which wasn't even available in her town, and the nearest dealership for routine maintenance was more than an hour away," she said. "Once we factored in the added time and expense, it just wasn't a practical fit." 

Her experience is a good reminder that the total cost of ownership matters. Before you shop, ask yourself:

 

1. What monthly payment feels comfortable for my budget?
2. How much can I put down?
3. How much will insurance and other ownership costs add to my monthly budget?

 

Buying a car can be exciting, but it's also a decision that affects your budget for years to come. By getting pre-qualified, understanding the full cost of ownership, and focusing on what fits your needs and budget, you can make a more informed decision and feel confident about the road ahead.

As you navigate the process, having your banking, lending, insurance, and financial tools all in one place can make managing vehicle ownership—and your everyday finances—even easier.

Ready to start your car-buying journey? Contact First Mid to explore your financing options, get pre-qualified, or connect with a local team member who can help you find a solution that fits your budget and goals.