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Last updated: December 14, 2023

Car Affordability Calculator

Find the max price of a vehicle that will fit comfortably in your budget.

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Enter your desired monthly payment, estimated annual interest rate, down payment (including vehicle trade-in or rebates), and desired loan term (the length of time to completely pay off your loan), and see a target vehicle price for your budget.

Understanding how much vehicle you can afford

Financial experts recommend spending no more than 10 percent of your take-home pay on car payments and less than 15 to 20 percent on overall car expenses. Overall expenses include loan payments as well as gas, maintenance, and insurance.

For example, if you make $3,000 monthly after taxes, you would want to spend no more than $300 monthly on car payments and no more than $450 to $600 monthly on overall car expenses. Our Auto Loan Calculator can help you determine what your monthly payments might be for a particular vehicle.

Monthly take-home pay Monthly auto loan payment should not exceed Total monthly car expenses should not exceed
$2,000 $200 $300-$400
$2,500 $250 $375-$500
$3,000 $300 $450-$600
$3,500 $350 $525-$700
$4,000 $400 $600-$800
$4,500 $450 $675-$900
$5,000 $500 $750-$1,000

DID YOU KNOW?

The average car payment in the U.S. is $733 per month for a new car and $569 for a used car.1

How much car can I afford with my salary?

The following table will give you a sense of the price of a vehicle that fits your budget, based on your pre-tax salary and assuming you spend no more than 10 percent of your take-home pay on your car loan.

Annual pretax salary Estimated maximum monthly car payment Estimated maximum vehicle price, with 9% APR
$35,000 $250 $15,080
$45,000 $333 $20,107
$55,000 $417 $25,134
$65,000 $500 $30,161
$75,000 $583 $35,188
$85,000 $667 $40,214
$95,000 $750 $45,241
$105,000 $833 $50,268

Factors that affect how much vehicle you can afford

Credit Score and Interest

The better your credit score is, the higher-value car you can afford. That’s because a higher credit score will lower your interest rate, meaning you’ll pay less monthly and over the life of the loan.

New cars tend to have lower interest rates than used cars — though the higher sticker price can mean you’ll pay more overall.

The following table gives you a sense of how much car you can afford, assuming you spend $500 on monthly loan payments, put 20 percent down, and choose a 60-month loan term.

Credit score Estimated max price of new car you can afford ($500 monthly payment, 20% down, 60-month loan term) Estimated max price of used car you can afford ($500 monthly payment, 20% down, 60-month loan term)
781-850 $32,480 $29,778
661-780 $31,216 $28,228
601-660 $29,166 $26,837
501-600 $26,719 $23,460
300-500 $24,950 $21,860

Here is an overview of the potential interest rates based on your credit score.2

Credit score Average interest rate, new cars Average interest rate, used cars
781-850 5.18% 6.79%
661-780 6.40% 8.75%
601-660 8.86% 13.28%
501-600 11.53% 18.55%
300-500 14.08% 21.32%

TIP:

If your credit score is under 600, check out our roundup of the best auto loans for bad credit.

Loan Term

Your loan term is the length of time over which you pay back your auto loan, typically 24 to 84 months (two to seven years). The longer your loan term, the lower your monthly payments and the more car you can afford — but be careful, as longer loan terms have financial drawbacks.

The longer you take to pay off the loan, the more interest you’ll pay over time and the greater the chance you end up with negative equity (meaning you owe more on the car than it’s worth). Shorter loan terms have higher monthly payments, but you’ll pay less interest over the lifetime of the loan.

LOAN TERM:

Financial experts recommend choosing the shortest loan term you can comfortably afford. Some recommend no more than 36 months for a used car and no more than 60 months for a new car. Others recommend no more than 48 months for a used or new car.

For example, let’s say you plan to put $6,000 down and want to pay no more than $500 in monthly car payments. The following chart gives you a sense of how much car you can afford and how much interest you’ll pay overall, based on the loan term you choose.

Loan term (in months) Estimated total interest paid at 10% APR Estimated price of car you can afford ($500 monthly, $6,000 down payment)
24 $1,165 $16,835
36 $2,504 $21,496
48 $4,286 $25,714
60 $6,467 $29,533
72 $9,011 $32,989
84 $11,882 $36,118

Down Payment

The larger your down payment, the more car you can afford. A down payment reduces the amount of money you have to borrow to purchase a car — lowering your monthly payment and the overall interest you pay. Experts recommend putting down at least 20 percent, but even 10 percent will lower your interest payments.

For example, here’s how much car you can afford based on your down payment, assuming $500 monthly payments, 10 percent APR, and a 60-month loan term.

Down payment Estimated price of car you can afford ($500 monthly, 10% APR, 60-month loan term)
$0 $23,533
$2,000 $25,533
$4,000 $27,533
$6,000 $29,533
$8,000 $31,533

If you put less than 20 percent down, you should consider purchasing gap coverage. In the event your car is totaled, gap coverage pays for the difference between what you owe on the loan and your vehicle’s value after depreciation. Our Vehicle Depreciation Calculator can give you a sense of how much value your car will lose over time.

And if you’re trading in a vehicle, you can put its value toward a down payment. Kelley Blue Book offers an online tool to estimate the value of your trade-in, based on its mileage, condition, and location.

Additional costs

When determining how much vehicle you can afford, factor in expenses that can sneak up on you, like gas, auto insurance, and maintenance.

Once you have a particular vehicle in mind to purchase, get a quote for auto insurance to know what you’ll pay in premiums. More expensive vehicles, such as luxury and sports cars, are more expensive to insure. Smaller SUVs and minivans tend to be the cheapest to insure.

You can also calculate the cost of fuel depending on your commute and trips you plan to take.

Overall, aim to spend no more than 15 to 20 percent of your take home pay on all vehicle expenses, including loan payments, gas, auto insurance, and maintenance.

Set a target purchase price

After establishing the monthly payments that fit in your budget and the vehicle price you can afford, the final step is to make sure you account for taxes, registration, and documentation fees. In general, expect to pay 8 to 10 percent over the sticker price, though the exact amount will depend on factors like your location and the vehicle.

  • Sales tax: 0 to 10 percent depending on the state, with a national average of 5 percent
  • Registration fees: Varies by state and county, so check your DMV website; anywhere from $50 to several hundred dollars
  • Documentation fees: Varies by state, $100 to $800

Our Recommendations for Car Financing

We recommend the following lenders for an auto loan, based on their interest rates, loan terms, preapproval features, refinancing options, and more:

  • AUTOPAY: Best Overall Auto Loan
  • PenFed Credit Union: Best Credit Union
  • LendingTree: Best Rates
  • Bank of America: Best From a Bank
  • myAutoloan: Best From a Private Party

Keep reading: Best Auto Loans of 2023

Recap

To summarize, take the following steps to determine the price of a vehicle you can afford:

  1. Calculate the monthly payments you can afford. This should be no more than 10 percent of your take-home pay for loan payments, and no more than 15 to 20 percent for total car expenses.
  2. Calculate the loan amount you can afford. Use our calculator to figure out how big of an auto loan you can take on, taking into account down payment, estimated interest rate, and loan term.
  3. Set a target purchase price. Determine the price of the car based on the loan amount, as well as 8 to 10 percent extra in fees.

Vehicle Affordability FAQ

How much do you need to make a year to afford a $100,000 car?

To comfortably afford a $100,000 car, you’d need to make around $300,000 before taxes. That’s assuming a 20 percent down payment, good credit, and a 48-month loan term. Your loan payments would be about $2,000 monthly.

What is the 20/4/10 rule for a car?

The 20/4/10 rule for budgeting a car states you should make a 20 percent down payment, repay the loan in four years or less, and spend less than 10 percent of your monthly income on car payments.

The higher your down payment, the less you need to finance, lowering monthly payments and the overall cost of the loan. Shorter loan terms have higher monthly payments but will save you money on interest over the life of the loan because you’ll pay off the car more quickly.

Following the 20/4/10 rule helps promote responsible borrowing, keeps your car payments in line with a good budget, and allows you to better manage your overall financial health when buying a car.

Is $500 per month a lot for a car?

According to Edmunds, $500 is less than the average monthly car payment in the U.S. However, depending on your finances, cost of insurance, and other considerations, $500 may still be a tight squeeze for your budget. If you make less than $60,000 annually before taxes, consider a less expensive car to get your monthly payments lower than $500.

Citations

  1. Car Shoppers Feel the Heat from Scorching Financing Costs in Q2, According to Edmunds. Edmunds. (2023, Jul 3).
    https://www.edmunds.com/industry/press/car-shoppers-feel-the-heat-from-scorching-financing-costs-in-q2-according-to-edmunds.html

  2. What Is a Good Auto Loan Interest Rate? Experian. (2023, Jun 23).
    https://www.experian.com/blogs/ask-experian/what-is-good-auto-loan-interest-rate/