CarcostmeterHow much car can I afford?
Most affordability calculators only look at the loan payment. This one also counts insurance, fuel and upkeep, because those are paid from the same budget.
Your numbers
What fits your budget
- Paying cash instead? Saving $192 a month for a year buys a car of about $7,300.
Check: a loan of $8,004 at 7% over 48 months costs $192 a month, in total $9,200.
The 20/4/10 rule
A common rule of thumb for buying a car: put at least 20% down, finance for no more than 4 years, and keep all car costs, loan payment plus insurance, fuel and maintenance, under 10% of your gross income. It keeps you from owing more than the car is worth and leaves room for saving. A looser version allows 15%.
How the result is worked out
Your monthly car budget is your yearly income divided by 12, times the share you choose. The running costs come off first; what is left is the most you can pay on a loan. The largest loan that payment supports, at your interest rate and loan length, plus your down payment, is the highest price that fits.
Lenders may approve you for far more than this. That is how much they will lend, not how much fits comfortably in your budget.