Car Affordability Calculator
You can afford a car priced up to
$15,566
before tax and fees · $17,456 out the door
| Monthly car budget | $625 |
|---|---|
| Insurance | −$160 |
| Fuel | −$113 |
| Maintenance | −$80 |
| Loan payment (48 months at 6.5%) | $272 |
20/4/10 check: down payment 34% ✓ · term 48 months ✓ · car costs 10% of income ✓.
The budget covers everything the car costs each month, not just the payment, because insurance and fuel can add half again. Depreciation is the biggest hidden cost: most new cars lose about half their value in five years.
Work out how much car you can afford from your income, using a budget for everything the car costs each month (insurance, fuel and maintenance as well as the loan payment), with your down payment, trade-in, loan terms, sales tax and fees, and a check against the 20/4/10 rule.
Formula
Worked Example
10% of $75,000 is $625 a month. Insurance, $113 of fuel and maintenance leave $272 for the loan, which over 48 months at 6.5% borrows about $11,460. With $6,000 down that covers $17,456 out the door, or a $15,566 car after 7% tax and $800 of fees.
Frequently Asked Questions
What is the 20/4/10 rule for buying a car?
Put at least 20% down, finance for no more than 4 years, and keep total car costs (payment, insurance and fuel) under 10% of gross income. It keeps you from owing more than the car is worth and leaves room for other goals; up to 15–20% of income is a stretch budget.
Why include insurance and fuel in the budget?
Because they are paid every month along with the loan and can add half again to the payment. A cheaper car with low insurance and good fuel economy can cost less per month than a pricier one with the same payment.
Is a longer car loan a good idea?
72- and 84-month loans lower the payment but cost more interest and usually leave you owing more than the car is worth for years, which hurts if it is totaled or you want to trade it in. A cheaper car on a shorter loan is the safer way to lower the payment.