Car Affordability Calculator:
How much car can you afford?

Field guide

How to budget for a car purchase.

A car is typically the second-largest purchase most people make. Unlike a house, it depreciates the moment you drive off the lot — the average new vehicle loses 15–25% of its value in year one alone. That makes the financing decision especially consequential: overspend on a car payment and you risk being “car poor” — cash-strapped every month while owning an asset that's shrinking in value.

The three scenarios

Lenders, financial planners, and personal-finance sites use different thresholds. This calculator tests the three most common:

• Conservative (10% of gross): Follows the spirit of the 20/4/10 rule. Keeps your total vehicle commitment below 10% of gross monthly income. Safest buffer for emergencies, savings goals, and lifestyle spending.
• Moderate (15% of take-home): The most widely cited modern benchmark. Uses after-tax income so it's more accurate than gross-based rules for high-tax states or dual-income households.
• Aggressive (20% of take-home): The upper bound recommended by most financial advisors before the purchase starts crowding out retirement contributions, emergency funds, or other goals.

The max vehicle price formula

Working backwards from the monthly payment you can afford:

Where PMT is max monthly payment, r = APR / 12 / 100, and n = loan term in months. The max vehicle price then accounts for sales tax:

Total cost of ownership (TCO)

The sticker price is only the beginning. This calculator tracks four additional recurring costs over the loan term:

• Interest: The cost of borrowing. At 7.5% APR over 60 months on a $25,000 loan, you'll pay about $5,000 in interest — 20% more than the principal.
• Insurance: Full-coverage insurance is typically required by lenders. National average is around $1,800/year for a mid-size sedan, but varies greatly by age, driving record, vehicle type, and location.
• Fuel: Computed as (annual mileage ÷ MPG) × price per gallon × years. Electric vehicles have near-zero fuel cost but higher insurance and purchase price — adjust the MPG field to reflect equivalent electric efficiency.
• Maintenance: Oil changes, tires, brakes, and unexpected repairs. Industry averages range from $1,000/year for a new domestic sedan to over $2,000/year for luxury imports out of warranty.

Down payment and trade-in strategy

A larger down payment does three things: it reduces your loan (and thus monthly payment and interest), it reduces the risk of negative equity in the first year or two, and it signals creditworthiness to lenders. If you have a trade-in, dealers typically apply its value as a reduction to the purchase price — functionally identical to a down payment in this model.

The 20/4/10 rule suggests at least 20% down. On a $30,000 vehicle that's $6,000 upfront — a meaningful barrier for first-time buyers, which is why the moderate and aggressive scenarios exist.

Loan term: shorter vs longer

Stretching to 72 or 84 months lowers the monthly payment but dramatically increases total interest paid — and raises the risk of being underwater when you want to sell or trade in. A 60-month loan at 7.5% APR costs roughly 20% more in interest than the same loan at 48 months. If you need a very long term to afford a vehicle, that's a signal the price point is too high for your budget.

Disclaimer: Results are for budgeting purposes only. Actual loan approval, APR, and maximum loan amount are determined by the lender based on your credit score, income verification, and debt-to-income ratio. This tool does not constitute financial advice.