“How much car can I afford?” is really two questions. The first is how much you can pay each month without squeezing everything else. The second is what price that payment buys once you add the down payment and the value of your trade-in, and take out sales tax, fees and the interest the lender charges. Most car shopping starts with the sticker price and works forward to a payment; this calculator works the other way, from a payment or a share of income back to the highest price you should be looking at.
How to use the car affordability calculator
- Choose how to set the budget. Enter a monthly payment you are comfortable with, or choose a share of gross income and let the calculator turn it into a payment.
- Enter the loan terms: the APR you expect and the number of months.
- Add what you bring: cash down payment and any trade-in, with the balance still owed on it.
- Add sales tax and fees, and your monthly insurance, fuel and upkeep so the result shows the full monthly cost.
Car affordability formula
Buying power = L + down payment + trade-in − balance owed
Maximum price = (buying power − fees) ÷ (1 + tax rate ÷ 100)
The first line is the present value of n monthly payments of size P, which is the amount a lender will advance against those payments. The second adds the cash and the equity you bring. The third removes fees, then divides out sales tax, because tax is charged on the price. If the trade-in is worth less than you owe, the shortfall reduces buying power.
Worked example
You can pay $500 a month for 60 months at 7% APR, with $3,000 down, 6% sales tax and $500 in fees.
- Loan: 500 × (1 − 1.005833−60) ÷ 0.005833 = $25,251.00.
- Buying power: $25,251.00 + $3,000 = $28,251.00.
- Subtract $500 in fees and divide by 1.06: maximum price $26,180.19.
- Interest over the loan is $4,749.00, and with $300 of other monthly costs the car takes $800 a month, 13.3% of a $72,000 income.
Maximum price by monthly payment
With $3,000 down, $500 fees and 6% tax, using the formula above.
| Monthly payment | 5% / 60 mo | 7% / 60 mo | 7% / 72 mo | 9% / 72 mo |
|---|---|---|---|---|
| $300 | $17,356 | $16,652 | $18,959 | $18,059 |
| $400 | $22,355 | $21,416 | $24,492 | $23,293 |
| $500 | $27,354 | $26,180 | $30,026 | $28,527 |
| $600 | $32,353 | $30,945 | $35,559 | $33,760 |
| $700 | $37,352 | $35,709 | $41,093 | $38,994 |
| $800 | $42,351 | $40,473 | $46,626 | $44,228 |
Payment budgets by income
Monthly amounts at 10%, 15% and 20% of gross income. Treat them as upper ranges to test, not as targets.
| Gross annual income | 10% per month | 15% per month | 20% per month |
|---|---|---|---|
| $36,000 | $300 | $450 | $600 |
| $48,000 | $400 | $600 | $800 |
| $60,000 | $500 | $750 | $1,000 |
| $80,000 | $667 | $1,000 | $1,333 |
| $100,000 | $833 | $1,250 | $1,667 |
Staying inside the budget
- Budget for the whole car. Insurance, fuel, maintenance and registration can add several hundred dollars a month on top of the payment.
- Shop for the loan before the car. A pre-approved rate lets you use a realistic APR here and compare against dealer financing; see the auto loan calculator for the payment on a specific car.
- Watch the term. A longer loan raises what you can borrow and what you pay in interest.
- Beware negative equity. If you owe more than the trade-in is worth, that debt follows you into the new loan and cuts what you can spend on the car itself.
Frequently asked questions
How much car can I afford?
Start from the monthly payment you can carry after rent, food, insurance, fuel and savings, then work backwards through the loan formula to a price. This calculator does that, adding your down payment and trade-in equity and then removing sales tax and fees so the answer is the sticker price you can negotiate toward.
What is the 20/4/10 rule?
It is a rule of thumb often quoted in personal finance: put at least 20% down, finance for no more than 4 years, and keep total car costs near 10% of gross income. It is a guide, not a law; use the income mode with a share and a 48-month term to see what it implies for you.
Why does the price come out lower than payment × months?
The loan covers only part of the cost. Sales tax and fees are paid on top of the price, and interest is part of every payment, so the price you can afford is smaller than the sum of the payments, even after adding the down payment.
Should I include insurance and fuel in my budget?
Yes. The payment is only part of owning a car. Enter insurance, fuel and maintenance in the other-costs box and the calculator shows total monthly car cost and its share of gross income. For a fuller picture try the Total Cost of Car Ownership Calculator.
Does a longer loan let me afford more car?
On paper it does, because the same payment supports a bigger loan. In practice it costs more interest and keeps you owing more than the car is worth for longer. Compare 48, 60 and 72 months and look at the total interest line before stretching.