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Car Affordability Calculator

Work backwards from what fits your life, not forwards from what a dealer will approve.

Enter your income and interest rate to see a car price that fits your whole budget.

Work out my budget

Including insurance, fuel and maintenance. 10–15% is a common ceiling.

Running costs each month

These come out of the same budget as the payment. Leaving them at zero makes any car look affordable.

Tax and fees

Estimate. A real-world figure based on the assumptions listed below, which you can change.

How this calculator works

The budget starts from **total cost of ownership**, not the loan payment. Insurance, fuel and maintenance come out of the same money as the payment, and leaving them out is how people end up with a car they can technically finance but cannot comfortably run.

Whatever is left after those costs is what supports a loan. That amount is turned into a principal at your rate and term, and the affordable price is that principal plus your down payment and trade-in equity, less sales tax and fees — which are paid out of the same budget rather than added on afterwards.

A second scenario applies the 20/4/10 guideline: 20% down, a term of no more than four years, and all car costs under 10% of gross income. It is deliberately conservative, and where the two answers diverge sharply it is the one worth trusting.

The formula

Exactly what happens to your numbers, step by step.

  1. What is left for a payment

    car budget = gross monthly income × budget %
available  = car budget − insurance − fuel − maintenance

  2. The loan that payment supports

    principal = payment × (1 − (1 + i)⁻ⁿ) ÷ i

    The present value of the payment stream — the amortisation formula run backwards.

  3. Affordable price

    price = (principal + down payment + trade-in equity − fees) ÷ (1 + sales tax rate)

A worked example

$90,000 income, 15% of gross for all car costs, $5,000 down, 7% over 60 months, with realistic running costs.

What you enter

Annual income
$90,000
Share for car costs
15%
Insurance / fuel / maintenance
$150 / $150 / $75 a month
Down payment
$5,000
Rate and term
7% over 60 months

The working

Monthly car budget
$1,125
Running costs
−$375
Available for the payment
$750
Loan that supports
≈ $37,900
Plus down payment, less tax and fees
≈ $40,000

About $40,000 on your terms · about $23,000 under 20/4/10

The gap is large because 20/4/10 uses a four-year term and half the income share. Both are defensible; the shorter term costs far less interest and leaves you above water on the loan much sooner.

Assumptions

Every result here rests on these. Change your inputs and the result changes with them.

  • Income is gross, before tax.
  • Running costs are yours to estimate — they vary enormously by car, driver age and location.
  • The trade-in equity entered is positive equity. If you owe more than the car is worth, use the Car Payment Calculator, which handles rolled-in negative equity.
  • Sales tax is charged on the vehicle price. Some states also tax fees.

What this cannot tell you

  • Depreciation is not modelled here. It is usually the single largest cost of owning a new car, and it is invisible until you sell.
  • Insurance quotes vary by more than most people expect between cars — get a real quote before committing.
  • It cannot tell you whether a cheaper used car would serve you better.

Questions people ask

What is the 20/4/10 rule?

Put at least 20% down, finance for no more than 4 years, and keep all car costs — payment, insurance, fuel and maintenance — under 10% of gross income. It is a conservative guideline that keeps you from being underwater and keeps the car from crowding out everything else.

How much car can I afford on $60,000 a year?

At 10% of gross income that is $500 a month for everything. After realistic running costs of $300 to $400, that leaves $100 to $200 for a payment — which points at a modest used car rather than a new one. Enter your own numbers above for a figure that reflects your situation.

Why does a longer loan let me buy more car?

Because it spreads the same principal over more payments. It also means far more interest and years of owing more than the car is worth. The monthly figure improves; the deal does not.

Should I include insurance in my car budget?

Yes. It is unavoidable, it is often $100 to $300 a month, and it goes up on a newer or more powerful car. Budgeting only for the payment is the most common way people overcommit.

Related calculators

Sources and review

This calculator uses standard arithmetic with no external rules or published rates, so there is nothing to cite beyond the formulas shown above.

Methodology version 1.0.0 · Last reviewed