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Automobile Affordability Calculator

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Your Results

With a monthly loan payment of $500.00 over 4 years at 5%, plus your $3,000.00 down payment, you can afford a car costing about $24,711.48: a $21,711.48 loan plus the down payment. A common guideline is to keep all car costs, including insurance, under 20% of your take-home pay, which is $500.00 for you. Your budget is 20% of your take-home pay, within that guideline.

$24,711.48
Car Price You Can Afford
$21,711.48
Loan Amount
$500.00
Monthly Loan Payment
$2,288.52
Total Interest
20%
Budget vs Take-Home Pay

Car price vs what you'll pay

Car price you can afford$24,711.48
Total you'll pay for it$27,000.00
  • Down payment $3,000.00
  • Loan $21,711.48
  • Interest $2,288.52

Car budget vs take-home pay

Your car budget20%
20% guideline

Your $500.00 budget is within the suggested $500.00 (20% of your take-home pay).

What Is Car Affordability?

Car affordability is the most you can sensibly spend on a car without straining your budget. Instead of starting from a car's sticker price, it works backwards from what you can pay each month: that monthly amount, your interest rate and the loan term decide how much you can borrow, and your down payment adds to it.

The monthly payment is only part of owning a car. Insurance, fuel, maintenance and registration all come out of the same budget, so it pays to set aside room for them before deciding how much loan you can carry.

Common rules of thumb

  • The 20% rule: keep all car costs, including the loan payment and insurance, under 20% of your monthly take-home pay. This calculator uses it as its guideline.
  • The 20/4/10 rule: put at least 20% down, borrow for no more than 4 years, and keep total car costs under 10% of your gross (before-tax) income. It is stricter, but leaves more room for saving.
  • Keep the loan shorter than the car's useful life: long 6–7 year loans lower the payment but cost more interest and can leave you owing more than the car is worth.

How to Calculate How Much Car You Can Afford

First take your insurance and other fixed car costs out of your monthly car budget; what is left is the loan payment you can make:

PMT=Monthly car budget−Insurance

The loan that payment can repay is its present value over the loan term:

Loan=PMT× 1−(1+i)−n i
Car price=Loan+Down payment

Where i is the monthly interest rate (yearly rate ÷ 12) and n the number of monthly payments (years × 12). At 0% interest the loan is simply PMT × n.

Example

A $500 monthly budget, 5% interest over 4 years, and $3,000 down:

  • i = 5% ÷ 12 = 0.0041667, and n = 4 × 12 = 48
  • Loan = $500 × (1 − 1.0041667−48) ÷ 0.0041667 = $21,711.48
  • Car price = $21,711.48 + $3,000 = $24,711.48
  • If $150 of that budget goes to insurance, the loan payment is $350, the loan $15,198.03 and the car price only $18,198.03.

How to Use the Automobile Affordability Calculator

"I take home $2,500 a month and have $3,000 for a down payment. If I keep my car spending to $500 a month, how expensive a car can I afford with a 4-year loan at 5%?" This calculator answers that.

Let's enter the numbers for this example in each box. They are already filled in when the calculator opens, so you can follow along and then change any box to match your own situation.

  • Take-Home Pay: Enter 2,500, which is your monthly pay after taxes. It must be greater than 0. Changing it also changes the suggested car budget below, until you type your own budget.
  • Interest Rate: Enter 5, which is the yearly interest rate on the car loan in percent. Enter 0 for a 0% deal. It must be below 100.
  • Down Payment: Enter 3,000, which is the cash you put toward the car. It usually comes from savings, so don't use up your emergency fund. It must be 0 or more.
  • Loan Term: Enter 4, which is how many years the loan lasts. It must be a whole number from 1 to 100.
  • Car Budget: Leave it at 500, which is everything you can spend on the car each month, including insurance. It starts at 20% of your take-home pay; type your own amount to change it. It must be greater than 0.
  • Insurance: Enter 0, which is your monthly insurance and other fixed car costs, paid out of the car budget. The rest of the budget goes to the loan. Try 150 to see how much it lowers the car price. It must be 0 or more and less than the car budget.

Calculate and Reset

Click Calculate to see your results. If a box has a problem, such as insurance that is more than the car budget, a message pops up under that box instead. With the default numbers you get:

  • Your Results: a short summary in words: the car price you can afford ($24,711.48), how it splits into the loan and the down payment, and whether your budget is within the 20% guideline.
  • Car Price You Can Afford: the headline number, $24,711.48.
  • Loan Amount, Monthly Loan Payment, Total Interest and Budget vs Take-Home Pay: $21,711.48 borrowed, $500.00 a month, $2,288.52 of interest, and 20% of your pay. The last one turns amber and red when your budget is above 20%.
  • Car price vs what you'll pay: two bars on the same scale. The first shows the car price split into the down payment and the loan; the second adds the interest, so you can see what borrowing costs.
  • Car budget vs take-home pay: a bar showing your budget as a share of your pay, with a line at the 20% guideline.
  • Share Results: a link that opens this calculator with your numbers filled in. Copy it, or share it on Facebook or X.

Amounts of $1 million or more are shortened, for example $1.25M. Click Reset to put every box back to its default and show the default results again.

Video: How to Use the Automobile Affordability Calculator