Car Affordability Calculator: How Much Car Can I Afford?
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A common guideline is to keep total car costs at 10% of gross income. On $6,000 a month before tax that is $600, which covers the loan payment, insurance and fuel.
On $6,000 a month before tax, 10% is $600 for the car. After $300 for insurance and fuel, $300 is left for the loan. That supports a loan of $15,151 and, with $5,000 down and 7.0% tax and fees, a car priced up to about $18,832.
Price you can afford by loan term
| Term | Loan | Max price | Interest |
|---|---|---|---|
| 4 years | $12,528 | $16,381 | $1,872 |
| 5 years | $15,151 | $18,832 | $2,849 |
| 6 years | $17,596 | $21,118 | $4,004 |
| 7 years | $19,877 | $23,250 | $5,323 |
Same monthly payment in each row.
Show the steps
- Car budget: $6,000.00 × 10% = $600.00 a month.
- Loan payment: $600.00 − $300.00 insurance and fuel = $300.00.
- Loan size: the amount a payment of $300.00 repays in 60 months at 7.000% = $15,150.60.
- Price: ($15,150.60 + $5,000.00) ÷ (1 + 7.00%) = $18,832.33.
Maximum loan from a payment
Loan = payment × (1 − (1 + r)^−n) ÷ r
Price = (loan + down payment) ÷ (1 + tax rate)
r = annual rate ÷ 12, n = months
- The 20/4/10 guideline suggests 20% down, a loan of no more than 4 years and total car costs of 10% of gross income.
- Maintenance, registration and parking are not included. Add them to Insurance and fuel for a fuller picture.
Estimates for planning and learning, not financial, tax, legal or medical advice. Check figures with your lender, tax preparer or doctor before you act.
About this calculator
The sticker price is only part of what a car costs. Insurance, fuel, and interest add to the monthly bill. This calculator starts from the monthly amount you can afford and works backward to the price.
You choose how much of your income to give to the car, from a cautious 10% to a stretch 20%. The calculator subtracts insurance and fuel, turns the rest into a loan amount at your rate and term, adds your down payment, and removes sales tax to find the price.
How to use it
- Enter your gross income and pick the share you want to spend on car costs.
- Enter your monthly insurance and fuel costs.
- Enter your down payment, trade-in value, interest rate and loan term.
- Open the options to change the sales tax and fees, then read the maximum price.
The 20/4/10 rule
Put at least 20% down, finance for no more than 4 years, and keep total car costs, including insurance and fuel, under 10% of gross income. It is a cautious guideline. Many buyers stretch to 5 or 6 years, but each extra year adds interest and the risk of owing more than the car is worth.
Lower the cost
- Get a pre-approved loan from a bank or credit union to compare rates.
- Shop for insurance on the models you are considering.
- Consider a used car with a lower price and a shorter loan.
Sources
Quick check: test yourself
Under the 10% guideline, what is the total monthly car budget on $4,000 gross income?
Correct answer: $400. $4,000 × 0.10 = $400.
In the 20/4/10 rule, what does the 4 stand for?
Correct answer: A maximum loan term of 4 years. The rule suggests a loan of no more than 4 years.
A longer car loan usually…
Correct answer: Costs more in total interest. More months means more interest, even if the payment is lower.
Pick an answer for each question.
Common questions
How much car can I afford?
A common guideline is to keep all car costs, including the loan, insurance and fuel, at about 10% to 15% of your gross income.
What is the 20/4/10 rule?
Put 20% down, use a loan of no more than 4 years, and keep total car costs under 10% of gross income.
Does the price include sales tax?
The maximum price shown is before sales tax and fees, which are added on top.
Is a longer loan better?
It gives a lower payment but more total interest, and you may owe more than the car is worth for longer.
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