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.
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.