About the Car Affordability Calculator
This car affordability calculator answers the question “how much car can I afford?” by working backwards from your income. You choose what share of gross monthly income you are willing to spend on transportation, subtract what insurance and fuel will cost, and the rest becomes the maximum car payment. From that payment, the interest rate and loan term it works out the largest loan you can carry, then adds your down payment and trade-in and removes sales tax to give a maximum sticker price.
It is useful before you start shopping, so you walk into a dealership with a firm price ceiling rather than a monthly payment target that can be stretched with a longer loan. The chart shows how the maximum price rises with longer terms — a reminder that a 72- or 84-month loan buys a more expensive car by adding interest and years of payments.
The default follows a moderate version of the popular 20/4/10 guideline: roughly 20% down, a loan of about four years, and total car costs (payment, insurance and fuel) around 10–15% of gross income. Adjust the percentage to match your own budget and other debts.
With the default inputs, the maximum car price is $31,361.15. Change any value above to recalculate instantly.
How to use the car affordability calculator
- 1Enter your gross (pre-tax) monthly income.
- 2Choose what percent of income you want to spend on car costs in total.
- 3Enter expected monthly insurance and fuel or charging costs.
- 4Add your down payment, any trade-in equity, loan rate and term.
- 5Use the maximum price as your ceiling when shopping, including tax and fees.
Formula and method
First the calculator finds the monthly payment you can afford: your gross monthly income multiplied by the share you set aside for transportation, minus monthly insurance and fuel. It then uses the present-value-of-an-annuity formula to turn that payment into the largest loan it can repay over n months at the monthly rate r.
Adding your down payment and trade-in equity gives the total you can spend. Because sales tax and fees are paid on top of the price, the total budget is divided by (1 + tax rate) to find the highest sticker price that keeps everything within budget.
- r
- Monthly interest rate (APR ÷ 12 ÷ 100)
- n
- Loan term in months
- Share
- Percent of gross income for all car costs
- Tax
- Sales tax and fees as a decimal of price
Worked examples
$6,500 a month income, 15% for car costs, 48 months
15% of $6,500 is $975; after $300 of insurance and fuel, $675 is left for the payment. At 6.9% for 48 months that supports a $28,243 loan. Adding $5,000 down and dividing by 1.06 for tax gives a maximum price of about $31,361.
Strict 20/4/10 rule on $5,000 a month
Keeping all car costs to 10% ($500) leaves $250 a month for the loan. Over 48 months at 6% that repays $10,645; with $4,000 down and 7% tax, the ceiling is a car of about $13,687.
Higher income with a trade-in, 60 months
A $1,100 payment for 60 months at 7.5% supports a $54,896 loan. With $15,000 of cash and trade-in and 8% tax and fees, the maximum price is about $64,718.
Frequently asked questions
What is the 20/4/10 rule for buying a car?+
It suggests putting at least 20% down, financing for no more than four years, and keeping total transportation costs — payment, insurance and fuel — under 10% of gross monthly income. It is a conservative guideline designed to keep you from being underwater on the loan.
What percentage of income should go to a car payment?+
Many planners suggest keeping the car payment alone to 10–15% of take-home pay, or total car costs to 10–20% of gross income. The right number depends on your housing costs, other debts and savings goals.
Should I base my car budget on monthly payment or total price?+
Total price. Dealers can lower any monthly payment by stretching the term, which increases interest and keeps you in debt longer. Setting a maximum price first protects you from that tactic.
Does this include the cost of maintenance?+
No — the budget covers the loan payment, insurance and fuel you enter. Set aside extra for maintenance, tires and repairs, especially for used cars out of warranty, or include an estimate in the fuel field.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.