Car Affordability Calculator

Use our car affordability calculator to determine which cars fit your budget. Enter your desired monthly car payment, down payment and estimated trade-in value along with other assumptions. We'll tell you what car prices you can afford and point you to cars within that budget.

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* Total loan amount factors in down payment, trade-in value and sales tax.

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How Much Car Can I Afford?

One of the key steps in the process of buying a car is figuring out what your budget is. If you’re able to pay cash for a car, setting a budget is easy – look at the money you have on hand for a car, and there’s your budget. For most people, though, buying a car means getting a car loan, which can make the budgeting process more difficult. Instead of taking a hard number and comparing it to the price of a car, you need to compare potential loan payments to your monthly budget. In short, how much car you can afford comes down to how much you can borrow, which comes down to how much you can afford to repay each month.

If you already have a car in mind and want to know what the payment might be, check out our car payment calculator.

Car Affordability Calculator

Instead of getting to the dealership only to find out that you can’t afford the payments on the kind of car loan you need for your dream ride, use our car affordability calculator to help you find the car loan payment that fits with your monthly budget. We’ll also tell you the price of the car you can afford. Then you can focus your shopping on cars with that price (or lower). To use the calculator, you just need to need to fill out each field. Not sure what each field is asking for? Read on and we’ll explain each one.

How Much Should My Car Payment Be?

A car loan is debt, and your total monthly debt payments should not be more than a third of your monthly take-home pay. It’s important to note that this figure includes the total amount you should spend on all debt repayment. If you have credit card debt, student loan debt, or medical debt payments, you need to deduct those from that number. The remainder is how much you can spend on a car payment.

For example, let’s say you take home $3,500 per month; a third of that is $1,155. If you have a $700 student loan repayment every month, you can reasonably spend about $450 each month on a car payment.

Keeping all of your debt repayments to less than a third of your monthly income is what most personal finance experts recommend. It allows you to have money left each month to pay for necessities like housing and groceries (because we all like having a roof over our heads and eating) and save money for the future.

Keep in mind that when you apply for a car loan, you may hear that you can handle a payment that’s higher than one that fits into the one-third rule. Even though that higher payment may get you into a nicer car, don’t go for it. The loan approval process doesn’t take into account the fact that you may have a medical emergency to pay for, or that you may want to go on vacation at some point, or that you don’t want to eat ramen for the duration of your car loan. This is especially true if you’re getting a car loan through a dealer. They get paid for originating the biggest loan possible and may not care if you’re unable to repay it. If you end up defaulting on the car loan, you can severely damage your credit and have your car repossessed.

Go for a car loan payment that does not put your total monthly debt payments over a third of your monthly income, and you’ll end up with a loan you can afford.

How Much Should I Put Down on a Car?

If you can, you should make a down payment that is 20 percent of the price of the car you’re buying. A down payment is a large cash payment you make at the start of your car loan. It can help lower your monthly payments and make sure you have equity in your next car right away.

A 20 percent down payment can be hard to come up with. For example, if you have your eye on a $20,000 car, a 20 percent down payment will run $4,000. That’s a lot of money to save, but you may not have to save it yourself. Check to see if the car you are interested in has any cash back offers. These are offers from the car manufacturer that effectively lower the price of the car. A lower price means you need to borrow less, which accomplishes the same thing as a down payment. A valuable trade-in (we’ll talk more about that below) can also lower the amount you owe for your car loan.

If you can’t get a cash back car deal and you don’t have 20 percent to put down – or you don’t know how much car you can afford yet – just enter the amount of money you can use as a down payment in the calculator.

While you can get a car loan with no money down, keep in mind that with no down payment, you’ll be upside down on your loan for a while. Being upside down on a loan means you owe more than the car is worth. Because new cars depreciate roughly 20 percent once they’re sold, putting 20 percent down keeps you from owing more than your car is worth. If you can’t put much (or any) money down on a car loan, make sure you at least get GAP insurance. GAP insurance covers the difference between what your car is worth and what you owe on it in the event of a total loss due to an accident or a natural disaster.

Other Factors that Affect How Much Car You Can Afford

Trade-in Value

If you currently own a car, you can trade it in for a new one. The value of your trade-in (minus any outstanding loan balance you owe on the vehicle) can be applied to the purchase of your next vehicle, lowering the amount of the new loan.

When you trade in a car, the dealer is effectively buying the car from you. But instead of cutting you a check, they’re putting that money toward the purchase of your next car. Let’s say you have a car that’s worth $15,000, and you owe $10,000 on it. That $5,000 difference is applied to the price of your next car. This allows you to take out a smaller loan, which saves you money.

It’s not all good news with trade-ins, though. Let’s go back to that trade-in that’s worth $15,000. If you owe $20,000 on it (instead of $10,000), you’ll have to borrow $5,000 more to pay for your next car. That’s because the dealer must pay off the outstanding loan on your trade-in, and they’ll charge you for any amount they have to spend beyond the car’s value. This is another reason why it’s wise to put 20 percent down on a new car – so you don’t owe more than the car is worth at trade-in, trapping you in a cycle of having to add extra debt to each car loan you take out.

Your lender can tell you how much you owe on your current car, and you can get a ballpark estimate of its value with our trade-in estimator. When you know the difference between what your car is worth and what you owe on it, you can enter it in the trade-in value box.

New Car Sales Tax

You probably pay sales tax when you buy a cup of coffee, and you’ll likely have to pay sales tax when you buy a car. Your state sales tax rate on car purchases should be easy to find. Just enter the percentage here. The sales tax is usually added to your car loan, increasing the amount you owe. Unfortunately, this amount isn’t negotiable. You just have to pay it.

Car Loan Interest Rate

The price of a car isn’t the only thing that determines how much car you can afford. The interest rate on your car loan also affects your monthly payment. The lower your rate, the lower the payment. However, not everyone qualifies for a low rate.

A car loan interest rate is the amount the lender charges you for borrowing money to buy a car. When you take out a car loan, the loan company gives the lump sum to the dealer and you pay them back bit by bit. The interest you pay is essentially just rent for the loan – it helps them turn a profit and cover the risk that not everyone they lend money to will pay them back. The bigger risk you are for not paying them back, the higher your interest rate will be.

The most important factor in determining your interest rate is your credit score. People with high credit scores will get lower interest rates because they are seen as being at low risk for not paying their car loan back. People with low credit scores are seen as a higher risk for not paying the money back. Take a look at your credit score and current interest rates to estimate the interest rate you may get on your next car purchase. You can still get a car loan with bad credit, but it might take a few extra steps.

Car Loan Term

Your car loan term is the total number of months you’re going to take to repay your car loan. A shorter loan term equates to higher payments, as you’ll be paying the loan back more quickly. However, because interest on the loan will have less time to accrue, you’ll also be paying less money overall. Think of it as shorter-term monthly pain for long-term gain.

A longer loan term gives you more time to pay off the loan, which gives you lower monthly payments. However, it means you’ll pay more for the loan overall as the interest on your car loan will have more time to accrue. There’s another risk to a long loan term: because you’ll be paying the loan back more slowly, it’s likely you’ll owe more than your car is worth for a long time. As we talked about above, that can end up hurting you if the car is totaled. Plus, with a long car loan, you’ll still be making payments when your car’s warranty runs out – which means you’ll be spending using money you could spend on repairs to instead make car payments.

Financial experts recommend that you don’t take out a car loan for longer than three years. That said, cars are expensive and you may need to take out a four- or five-year car loan to fit the payments into your monthly budget. Just make sure you understand what you’re getting into with a longer loan term.

More Information:

How to Buy a Car

Get helpful tips on car financing, including advice on how to get a car loan, whether to buy or lease and how to negotiate for a car.

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