Car Affordability Calculator
Car Affordability Calculator
What does a car affordability calculator do?
A car affordability calculator turns a car loan calculator on its head. A loan calculator begins with a car's purchase price as the premise and works toward a monthly payment by adding sales tax, license, and document fees, then arriving at a payment amount according to the interest rate and term you supply. The affordability calculator uses the same variables but in reverse order. You enter your desired monthly payment (the amount you can afford) and fill in the known variables, like tax rate, license and document fees, interest rate, and loan term. The calculator computes the price of the car you can afford within those parameters.
How much can I afford per month?
The current wisdom from personal finance advisers is to limit your monthly car budget to less than 20% of your take-home pay. A car budget includes your car payment, insurance, fuel, maintenance, and repairs. Learn about the cost to own evaluation to help calculate this budget. Curious to see how a car's value will change over time? Use our depreciation calculator.
Beyond price, what factors affect affordability?
Beyond price, loan interest rate and term are the two significant factors affecting affordability. Higher interest rates result in higher monthly payments, while longer terms result in lower monthly payments. Shop for the best loan rate you can qualify for before you go to the dealership. You may still choose to finance your car through the manufacturer or dealership, but knowing the best rate you can qualify for gives you leverage in negotiation. Choose the shortest term that results in a monthly payment you can afford since the less time you carry a loan balance, the less total interest you will pay on your car purchase. Extending your loan term may lower your monthly payment but will increase your total cost of ownership.
For more information, see Can I Afford a Car in 2023?
Financing Tips: Affordability
0% APR Quick Facts 0% APR means no interest. Borrowers need gold-plated credit to qualify. Most 0% APR car loans…
If you need to buy a vehicle right now, we’ll provide expert tips on how you can navigate higher interest rates to help save you money.
FAQs
According to our analysis, you shouldn't spend more than 10-15% of your net monthly income on your car payment. Your total budget for transportation, including the loan and insurance payments, gas, and maintenance costs, should not exceed 20% of your net monthly income. Our best advice is to buy within your means and never overextend your budget for a car. For an in-depth affordability calculation check out Kelley Blue Book's Car Affordability Calculator.
You might comfortably afford a vehicle costing roughly half of your salary. So, if your annual salary is $100,000, then you might shop for a car (or cars) worth a total of $50,000. However, every financial situation is unique and people have different priorities. Interest rates, insurance premiums, and other factors also impact the total cost of your driving a vehicle. But remember that plenty of millionaires have modest automobiles, and just because you can afford a more expensive car, you don't have to buy it. For more on this, check out Kelley Blue Book's Car Affordability Calculator.
We recommend you aim to spend about 10% of your take-home income on your monthly car payment. So, if you take home $3,000 each month after taxes, you might be comfortable having a vehicle with a monthly payment of around $300. However, your budget will fluctuate based on other expenses. Your insurance premium might be higher than average, and you might also need to include parking costs in your budget. Check out Kelley Blue Book's Car Affordability Calculator for an in-depth affordability calculation.
Monthly payments will vary based on the down payment, interest rate and term of the loan. For a $30,000 loan, for example, if you put $2,500 down and secure a 5% interest rate for a loan of 3 years, you would expect to pay around $824.20 per month. For a precise estimate of monthly lease costs and total cost of your loan, check out Kelley Blue Book's Car Affordability Calculator.