Car Loan Calculator
How Much Car Can I Afford?
Dealers tend to ask what monthly payment you want, which is the easiest number to stretch. A better question is what price your income supports on a sensible loan, after insurance, fuel and upkeep.
Short answer: a common guideline is the 20/4/10 rule: put at least 20% down, finance for no more than 4 years, and keep total car costs (payment, insurance, fuel, upkeep) under 10% of your gross income. On a $75,000 salary, that works out to roughly a $18,049 car with $5,000 down.
The 20/4/10 rule
- 20% down. Keeps the loan smaller than the car's value from day one, so you aren't underwater.
- 4-year loan or shorter. Limits interest and makes sure the loan is paid off while the car still has plenty of life left.
- Under 10% of gross income on car costs. Counts the costs of owning the car, not just the payment, so the car fits alongside housing, savings and everything else.
It's a guideline, not a law. Some versions apply the 10% to the payment alone, or allow 15% for all car costs. If you live somewhere you drive a lot, or you have little other debt, you might reasonably go higher; with student loans or high rent, lower is safer.
Working it through
Say you earn $75,000 a year before tax:
- Monthly gross income: $75,000 ÷ 12 = $6,250.
- Car budget at 10%: $625 a month.
- Take out insurance, fuel and upkeep, estimated at $250 a month. That leaves $375 for the loan payment.
- At 6.5% APR over 48 months, with $5,000 down, 7% sales tax and $1,500 in fees rolled in, a $375.00 payment supports a car priced at about $18,049.
Insurance, fuel and upkeep are the step people skip, and they can be as large as the payment. Get an insurance quote for the specific car before you buy; rates vary a lot by model, age and where you live.
Why a longer loan isn't more affordable
With the same $375 payment, a longer loan lets you buy a more expensive car:
| Loan length | Car price you could buy | Total interest |
|---|---|---|
| 36 months | $14,706 | $1,265 |
| 48 months | $18,049 | $2,187 |
| 60 months | $21,183 | $3,334 |
| 72 months | $24,120 | $4,692 |
| 84 months | $26,872 | $6,247 |
Stretching from 48 to 84 months raises the price you can buy from $18,049 to $26,872, but raises the interest from $2,187 to $6,247, and keeps you paying for seven years on a car that loses value every one of them. The monthly payment is the same; the car simply costs more than your income supports. More on that in whether a 72- or 84-month loan is a bad idea.
How to buy more car on the same income
- Save a bigger down payment or bring a trade-in, which in most states also lowers the sales tax.
- Get a lower APR. Better credit, or a pre-approval from a bank or credit union, raises the price a given payment supports.
- Pay tax and fees in cash rather than financing them.
- Consider a lightly used car. Someone else takes the steepest part of the depreciation.
Try it with your own numbers: Car affordability calculator →
Figures in this guide come from the same code that runs the calculators. They're estimates, not financial advice; your lender's numbers are final. How the calculators work.
More guides
- How Auto Loan Interest WorksWhy early payments are mostly interest, how APR and loan length change what you pay, and how extra payments cut interest.
- Is a 72- or 84-Month Car Loan a Bad Idea?What a longer car loan saves you each month, what it costs in total interest, and the negative-equity risk that comes with it.
- How Much Should You Put Down on a Car?How 0%, 10% and 20% down change your payment, interest and loan balance, and when a smaller down payment makes sense.
- Does a Trade-In Lower Your Sales Tax?Most states tax only the difference after a trade-in, but several don’t. The states that differ, with worked examples.
- When Does Refinancing a Car Loan Make Sense?How to tell whether a refinance saves money: rate drop, fees, break-even month, and the trap of stretching the loan.