Car Affordability Calculator

How much car can I afford?

How much should you spend on a car?

5 steps to finding an affordable car:

  • Figure out how much you spend each month

    Most people know how much they make off the top of their head but can’t say how much they spend in a month. Take a few minutes to go old-school and record your budget breakdown on paper. Add up what you spend — including how much you contribute to savings — on rent or mortgage, utilities, food, child care, entertainment and more. This will help you with the next step.

  • Find room in your monthly budget

    Only you can truly say how a car fits into your household budget after accounting for needs, wants and savings, but the rule of thumb is to keep total transportation costs to 10% or less of your gross income. If you earn $5,000 per month, your monthly budget for a car should add up to $500 or less. That includes your car payment, insurance, gas and maintenance costs. If you’re not sure how to estimate fuel costs, go to fueleconomy.gov. If you’re buying car insurance for the first time or adding another car to your household, compare auto insurance quotes.

  • Find the best car loan for you

    The rule of thumb is to finance your car for no more than four years or 48 months, but keep in mind that the average new-car loan term is closer to six years (five years for used cars). How long are you willing to have an auto loan? The shorter the loan, the less you’ll pay in interest, but your monthly payments will be higher.

  • Decide on a down payment

    Another way to reduce your costs is simply to borrow less. A down payment trims your total loan amount and has other benefits, too: It lessens your chances of becoming underwater on your car. New cars depreciate, or lose value, quickly. Without a down payment, that new car could easily become worth less than what you owe.

    Buying a used car is another easy way to cut borrowing costs — used is almost always cheaper. We recommend a lightly used vehicle. That way, you’re getting a nice car for less money but retain much of the factory warranty.

  • Check your credit

    Your credit score plays a large role in determining your auto loan rate. A high credit score sends a signal to lenders that you’re financially responsible and will pay back loans in full and on time. Consequently, lenders are more willing to lend you money at a lower interest rate.

    If your credit score is poor, it’s possible to get a bad credit auto loan, but you may pay higher rates. You could wait, improve your score and apply for a car loan later. If you need a car right away, it’s possible to accept the bad credit loan, continue to work on your credit and refinance later for a better rate.

What car can I afford?

Now that you know how much car you can afford, it’s time to match that number to market rates. How much is a car? There’s a car for virtually every budget, but the average price of a new car is almost $40,000. Used cars cost less with the average used vehicle selling for about $21,000.

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How to use our auto affordability calculator

Other car calculators start with a car price and tell you what kind of monthly payment you could expect. This calculator starts with the payment that fits best into your budget and shows you how much you should spend on a car. Adjust the down payment, interest rate, term and more to see how it changes your total loan amount.

Desired monthly payment: This number depends on what’s comfortable for your budget, but if you’re not sure what to enter, the average new car payment is $562 ($394 for used vehicles). Leasing is an alternative to taking out an auto loan and typically comes with lower monthly payments. It is possible to lease a used vehicle.

Down payment: Even a small down payment can reduce your borrowing costs. If you have a trade-in, any positive equity would be added to your down payment. If you owe money on your trade-in, that amount would be subtracted from your down payment.

Trade-in value: This is the value of your old vehicle which you are selling to the dealer when you buy your new car. You can find this number using free car valuation tools such as Kelley Blue Book (KBB), Edmunds or the National Automobile Dealers Association (NADA). Figures may vary, so keep in mind this is an estimation. Your dealership will make the final offer, but don’t take less than what your car is worth. You could also sell the vehicle yourself.

Amount owed on trade: If you don’t own your trade-in car — in other words, you haven’t paid it off and still owe money on it — this is your payoff amount. Call your lender to find out what this is. If you owe more than what the car is worth, that amount can be added to your new loan.

Credit score: Your credit score is a three-digit number that shows your financial health. The higher it is, the better. Here a few other things to keep in mind:

  • If you have never taken out a loan before, you may not have a credit score.
  • If you have often missed payments or paid late on bills or loans, you may have a low credit score.
  • If you have paid significant loans and bills on time, you may have a higher credit score.

To check your score, go here.

Interest rate: This is what you pay to the lender for loaning you the money, expressed as a percentage of your loan. It does not include fees charged for the loan. The amortization table shows how your costs break down over each month and year of the loan.

Loan term: This is how long the loan will last from the time you sign for your car until your final payment.

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