Car Affordability Calculator: How Much Can You Afford? (2024)

Owning a car can be a dream come true, but it can quickly turn into a nightmare if you don’t know “how much car can I afford”. With so many factors to consider, it’s easy to get lost in the process and end up with a car that’s way beyond your budget. Fear not! This comprehensive guide will help you navigate the complexities of determining the perfect budget for your next car purchase, ensuring a smooth ride toward your dream vehicle.

Key Takeaways

  • Establish a realistic monthly car budget and allocate 10-15% of take-home pay for the car payment.
  • Consider all associated costs, such as maintenance, insurance, fuel expenses, and sales tax to get an accurate picture of total ownership costs.
  • Utilize a car affordability calculator with accurate financial information to determine borrowing capacity and make smart purchase decisions based on needs & budget.

Car Affordability Calculator

So, how much car can you afford? As a rule of thumb, never spend more than 35% of your gross annual income on a car.

The following calculator allows you to see enter variables, including down payment, interest rate, and loan term to compare a monthly payment to what’s affordable.

Note that this calculator does not work for leasing. You can read more about deciding whether to lease or buy a car or use our buy vs lease calculator.

Utilizing a Car Affordability Calculator

Utilizing a car affordability calculator can assist in determining your borrowing capacity for an auto loan, taking into account factors like credit score, interest rate, and loan duration. This calculator can provide you with a better understanding of your borrowing capacity and help you identify a target purchase price for your car.

Remember that the estimates provided by a car affordability calculator are based on standard industry data, and the values that apply to your purchase may differ. Nonetheless, using a car affordability calculator can be a valuable resource in guiding you toward a car that fits your budget.

Inputting Financial Information

Using a car loan calculator in conjunction with a car affordability calculator requires entering your financial details such as monthly income, expenses, down payment amount, loan duration, interest rate, and trade-in value.

The calculator will provide you with an estimate of your borrowing capacity and a suitable loan amount based on your budget.

Interpreting the Results

Once you have the results from the car affordability calculator, you can use them to understand your borrowing capacity and identify a target purchase price for your car. Set a target purchase price based on your affordability and preferences, and use an online car shopping site to find various models listed according to their price.

Establishing Your Monthly Car Budget

The initial step in buying a car involves creating a feasible monthly car budget. This will help you avoid financial strain and ensure that your new vehicle fits comfortably within your overall financial plan. After all, there’s no point in driving a fancy car if you can’t afford to put gas in it or pay for necessary maintenance.

Begin the process of calculating your monthly car budget by evaluating your net income and deducting your recurring expenses, such as rent, bills, groceries, and savings. This will give you a clear picture of how much you can allocate towards a car payment, also known as your monthly payment, without stretching your finances too thin.

Importance of a Realistic Budget

Creating a feasible car budget is paramount to prevent financial difficulties and guarantee sustainable affordability. Failing to establish a realistic budget can lead to several consequences. You might end up buying a car that’s beyond your financial capabilities, resulting in monetary difficulties and potential debt. Lack of a feasible budget might lead to overspending on the vehicle and neglect of other vital expenses like insurance, maintenance, and fuel.

Additionally, not establishing a realistic budget can restrict your ability to save for other financial goals or emergencies. It can also make it challenging to plan for the long-term, as you may not be able to manage the cost of necessary upgrades or repairs in the future. In short, setting a realistic budget is a crucial step in making a smart car purchase decision.

Recommended Percentage of Take-Home Pay

Financial experts recommend allocating 10-15% of your monthly take-home pay for your monthly car payment and no more than 20% for total car ownership costs. By following these guidelines, you can ensure that your car expenses won’t put a strain on your overall budget. So, when asking yourself “how much car” you can afford, keep these percentages in mind.

Further budget refinement necessitates consideration of factors like your credit score, interest rate, and loan duration. Keep in mind that a low credit score may result in higher interest rates and increased monthly car payments. By improving your credit score and researching the best financing options, you can secure a better interest rate and lower your monthly payments.

Evaluating Total Car Ownership Costs

In evaluating which “car can I afford,” consider all facets of car ownership costs, including maintenance, insurance, and fuel expenses. These costs can significantly impact your overall financial situation and should be factored into your monthly budget when choosing a car you can afford.

Some additional expenses to consider when owning a car include registration fees and sales tax. To get a comprehensive picture of your total car expenses, consult websites like the Environmental Protection Agency’s, which offers fuel economy figures and annual fuel cost estimates for both new and used vehicles.

Maintenance and Repairs

Allocating funds for maintenance and repairs is a crucial part of owning a car. The age and condition of the vehicle, as well as potential issues with older models, should be considered when estimating these costs.

Newer cars typically have lower maintenance and repair costs due to warranties and fewer issues. However, as a car gets older, the likelihood of needing repairs increases, resulting in higher annual costs.

In general, luxury car models like Porsche, BMW, and Mercedes-Benz tend to have higher repair and maintenance costs. By understanding the potential maintenance and repair costs of a specific vehicle, you can make a more informed decision when choosing a car that fits your budget.

Insurance Premiums

When assessing your car affordability, it’s also vital to take insurance premiums into account. To estimate your insurance costs, research premiums based on factors such as your location, driving history, and the specific car model you’re considering. Request quotes from multiple insurance companies to compare rates and find the best coverage for your needs.

Keep in mind that car insurance premiums may vary depending on the make and model of the car, your driving history, and where you live. By comparing different insurance providers and options, you can lower your overall car ownership costs and find the best coverage for your unique situation.

Fuel Expenses

Another important consideration in car ownership costs are fuel and insurance costs. To calculate your fuel expenses, consider the vehicle’s fuel efficiency and local fuel price averages, with higher estimates for areas with a high cost of living.

Selecting a car with good gas mileage can be beneficial for your wallet, as it may result in cost savings each month and help maximize any employer mileage reimbursem*nts. Consult websites such as AAA’s Daily Fuel Gauge Report, GasBuddy, or the Fuel Economy website to find local averages for fuel costs.

Making Smart Car Purchase Decisions

With a firm grasp of your car budget and total car ownership cost, you can now proceed to make well-informed car purchasing decisions. By considering factors such as new vs. used cars, loan terms, and down payments, you can choose a vehicle that not only meets your needs but also fits your budget.

Armed with this knowledge, you can confidently approach car dealerships and negotiate the best deal possible, ensuring that your dream car becomes a reality without breaking the bank.

Choosing Between New and Used Cars

One of the first decisions you’ll need to make when buying a car is whether to opt for a new or used vehicle. Both options have their pros and cons, and the right choice will depend on your specific needs and budget.

New cars tend to have the latest features, better warranties, and lower maintenance costs. However, they also come with a higher price tag and faster depreciation. Used cars, on the other hand, are generally more affordable but may require more upkeep and have a shorter warranty period. By weighing the benefits and drawbacks of new and used cars, you can make a more informed decision that best suits your financial situation and requirements.

Deciding on a Loan Term

Selecting an appropriate loan duration is vital to balance your monthly payments and the overall interest paid throughout the loan’s lifespan. In general, shorter loan terms result in higher monthly payments but less overall interest, while longer terms lead to lower monthly payments with more interest paid.

It’s recommended to obtain a loan with a term of 60 months or less for a new car. By selecting an appropriate loan term, you can strike a balance between manageable monthly payments and minimizing the total interest paid on your car loan.

Determining an Appropriate Down Payment

An appropriate down payment can significantly reduce your loan amount and monthly payments, making your car purchase more affordable. Financial experts recommend a down payment of 10-20% of the total car price.

Trading in an existing vehicle can also help lower your loan amount by reducing the overall cost of the new car. By considering various down payment options and factoring in any trade-in value, you can find the optimal down payment amount for your specific financial situation.

Comparing Car Financing Options

In car financing, it’s critical to contrast different financing alternatives to secure the most favorable rates and conditions for your requirements. Consider the following potential sources of financing:

  • Dealership financing
  • Personal banks
  • Credit unions
  • Online lenders

Take into account factors such as interest rates, term options, and loan limits when comparing auto loan companies. By researching different financing options and comparing offers, you can secure the most advantageous auto loan for your car purchase.

Leasing vs. Buying: Which is Right for You?

Both leasing and buying present their respective pros and cons, with the optimal choice relying on your individual preferences and financial condition. Leasing typically offers lower monthly payments and allows you to drive a new car every few years, but it doesn’t contribute to car ownership and often comes with mileage limitations.

On the other hand, buying a car means that you own the vehicle and can sell it or trade it in if needed. However, purchasing a car is more expensive than leasing, and you may face higher maintenance costs as the car ages. By weighing the pros and cons of leasing vs. buying, you can determine the best option for your needs and financial situation.

Tips for Reducing Car Ownership Costs

You can employ various strategies to cut down your car ownership expenses. For example, improving your credit score can help you secure a lower interest rate on your car loan, leading to lower monthly payments and overall interest charges.

Another way to reduce car ownership costs is to trade in an existing vehicle, which can help lower the loan amount and result in lower monthly payments. Seeking additional income sources can also be advantageous, as it provides extra funds to cover car-related costs and makes car ownership more affordable in the long run.


In conclusion, knowing how much car you can afford is vital for making a smart car purchase decision. By establishing a realistic monthly car budget, evaluating total car ownership costs, utilizing a car affordability calculator, and making informed decisions about factors such as new vs. used cars, loan terms, and down payments, you can find the perfect car that fits both your needs and your budget. With this comprehensive guide, you’re now well-equipped to cruise towards your dream car with confidence.

Frequently Asked Questions

How do you know how much car you can afford?

To determine how much car you can afford, financial experts recommend keeping your total monthly car payment at 10% or less of your gross monthly income, spending no more than 15% to 20% of your take-home pay on car expenses, and ensuring that total vehicle costs, including loan payments and insurance, don’t exceed 20% of your monthly income.

How much car can I afford with a 70k salary?

Based on the 20/4/20 rule, with an average interest rate, you can afford a $19,000-20,000 car on your $70k salary.

How can I estimate my car insurance premiums?

To estimate your car insurance premiums, research rates based on factors like your location, driving history, and the car model you choose. Comparing multiple quotes from different insurers can help you get the best deal.

What are the advantages and disadvantages of leasing vs. buying a car?

Leasing a car offers the advantage of lower monthly payments and the flexibility to drive a new car every few years, but doesn’t lead to ownership of the vehicle. Buying a car is more expensive initially, but you gain the benefit of ownership with the potential to sell or trade it down the line.

How can I reduce my car ownership costs?

Improve your credit score, trade in an existing vehicle, and look for additional income sources to reduce car ownership costs.

Car Affordability Calculator: How Much Can You Afford? (2024)


Car Affordability Calculator: How Much Can You Afford? ›

There's no perfect formula for how much you can afford, but our short answer is that your new-car payment should be no more than 15% of your monthly take-home pay. If you're leasing or buying used, it should be no more than 10%.

How do you calculate how much you can afford for a car? ›

How much car can I afford based on salary? According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.

How much car can I afford on a $60000 salary? ›

How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.

What is the rule of thumb for car affordability? ›

The rule of thumb among many car-buying experts dictates that your car payment should total no more than 15% of your monthly net income, sometimes called your take-home pay (some might stretch this to 20%, but 15% is more conservative and therefore likely to make budgeting even easier).

How much should I spend on a car if I make $400,000? ›

So, how much car can you afford? As a rule of thumb, never spend more than 35% of your gross annual income on a car. The following calculator allows you to see enter variables, including down payment, interest rate, and loan term to compare a monthly payment to what's affordable.

Can I afford a car with 50k salary? ›

If you make a $50,000 gross salary, after taxes (depending on where you live) your monthly take-home pay is roughly $3,230. Based on the 10% rule, you could afford, at most, a $323 monthly car payment. If you take out a 60 month (5 year) auto loan at 8% interest, you can afford a $17,000 car.

What is the 20 3 8 rule? ›

The 20/3/8 car buying rule says you should put 20% down, pay off your car loan in three years (36 months), and spend no more than 8% of your pretax income on car payments. As we go into depth to determine how realistic this rule is, you may consider whether it can actually help you budget for your next car.

Is $500 a month too much for a car? ›

How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.

What price car can I afford based on salary? ›

It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.

How much car can I afford on a 100k salary? ›

How much car can I afford based on salary?
Annual salary (pre-tax)Estimated monthly car payment should not exceed
$25,000$208 per month
$50,000$416 per month
$75,000$625 per month
$100,000$833 per month
2 more rows
Oct 13, 2023

What is the 20 10 rule for buying a car? ›

Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses. These expenses include any money you put towards your new vehicle, including gas, insurance, and loan payments.

What is the 10 rule for buying a car? ›

The Car Buying Rule To Follow: The 1/10th Rule

The rule states that you should spend no more than 1/10th your gross annual income on the purchase price of a car. The car can be new or old. It doesn't matter so long as the car costs 10% of your annual gross income or less.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

How much should I spend on a car if I make $100,000? ›

Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.

How much money should you make to afford a 100000 car? ›

In that case, you need to consider groceries, utilities, and other household expenses. To afford a $100,000 car, it's probable you need to make $300,000 a year conservatively after taxes. For this example, we use our car payment calculator and approach it using the price of the car of $100,000.

What car can I afford with a 200k salary? ›

Get a nice Honda Accord or a Toyota Camry. Honda and Toyota make great cars. If you want something a little nicer buy an Acura TLX or a Lexus ES. If you prefer an SUV, get a Honda/Acura SUV., or an equivalent Toyota/Lexus.

What's a good down payment on a 30k car? ›

Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

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