How much car can you afford?
Instead of starting from a sticker price, this works backwards from the monthly payment you are comfortable with. It finds the largest loan that payment supports at your rate and term, then adds your down payment and any trade-in to give the maximum car price within reach. It keeps you shopping by budget rather than by showroom temptation.
Two examples
If you can pay 400 a month over 60 months at 7%, that supports a loan of about 20,200. Add a 3,000 down payment and you can afford a car priced around 23,200.
Bump the down payment to 6,000 and keep everything else the same. The loan the payment supports is unchanged, but your ceiling rises to about 26,200. Cash upfront lifts your budget dollar for dollar and lowers the interest you pay over the term.
Keep it comfortable
A common guideline is to keep total car costs, including insurance and fuel, under about 15 to 20% of your take-home pay. Remember the sticker price is only the start: tax, registration and running costs land on top, so leave room for them rather than stretching to the maximum this calculator shows.
How much car can you afford? The 20/4/10 rule
A widely used guideline keeps a car from crowding out the rest of your budget:
- 20% down payment,
- 4 years (48 months) maximum loan term,
- 10% of gross income as the ceiling for all car costs combined (payment, insurance, fuel, maintenance).
Rough monthly car budget by salary
Using the 10% ceiling for total car costs:
| Annual gross income | Total car budget / month |
|---|---|
| $30,000 | ~$250 |
| $40,000 | ~$333 |
| $60,000 | ~$500 |
| $80,000 | ~$667 |
| $100,000 | ~$833 |
The loan payment is only part of that budget, so leave room for insurance and running costs. Use the calculator above to turn your own numbers into a target price.
Frequently asked questions
Does it include insurance and fuel?
No, only the purchase financing. Budget insurance, fuel and maintenance separately, since they add a lot to the true monthly cost.
Does this include insurance and fuel?
No, only the purchase financing. Budget insurance, fuel and maintenance separately; the cost-of-ownership calculator helps.
How big a down payment should I make?
More is better. It raises the car you can afford and lowers interest, and reduces the risk of owing more than the car is worth.
What about tax and fees?
Those are on top of the price shown. Leave room in your budget for them.
How much car can I afford on a $60,000 salary?
Using the 10% rule, about $500 a month covers all car costs combined at $60,000 gross. After insurance and fuel, that supports a moderate loan payment, so a car in the mid five figures with a reasonable down payment is realistic.
What is the 20/4/10 rule for buying a car?
Put 20% down, finance for no more than 4 years, and keep total car costs (payment, insurance, fuel, upkeep) under 10% of your gross income.