How Much Car Can I Afford?
Before you fall in love with a car at the dealership, work out what your income actually supports. Enter your numbers below to see the maximum price you can afford — and how it scores against the well-known 20/4/10 rule.
Your budget
New to this? Leave the defaults — they follow the conservative 20/4/10 rule — and just change your income and down payment.
Your 20/4/10 scorecard
The classic rule for buying a car without overextending yourself.
What makes up the price
Your down payment and trade-in plus the loan your payment supports.
Does a longer loan help?
At the same monthly payment, a longer term buys more car — but costs more interest.
| Term | Max car price | Payment | Total interest |
|---|
How much car can you really afford?
It's tempting to shop by monthly payment, because a long enough loan can make almost any car "fit" your budget. But the monthly payment hides the real cost — and dealers know it. The smarter question is how much total car your income supports without crowding out everything else, and the most-cited answer is the 20/4/10 rule.
The 20/4/10 rule
- 20% down. Put at least a fifth of the price down (cash + trade-in). This offsets the steep first-year depreciation so you're not instantly underwater.
- 4 years max. Finance for no more than 48 months. If you need a longer loan to afford the payment, you're buying too much car.
- 10% of income. Keep all monthly car costs — payment, insurance, fuel and maintenance — under 10% of your gross monthly income.
It's deliberately conservative. Plenty of people break it — the average new-car loan now stretches well past 5 years — but the further you drift from it, the more of your paycheck a depreciating asset quietly consumes.
How we calculate it
We turn the share of income you choose into a monthly payment budget, then work backwards from that payment to the largest loan it supports, and add your down payment and trade-in:
Max loan = payment × (1 − (1 + r)−n) ÷ r (r = monthly rate, n = months)
Max car price = max loan + down payment + trade-in
Worked example: On a $60,000 income, 10% of monthly income is a $500 payment. At 7% over 48 months that supports a ~$20,900 loan, and with $3,000 down you can afford about a $23,900 car — right in line with the 20/4/10 rule.
What changes how much car you can afford
- Your credit score. It sets your APR, and the gap between a good and a poor rate can be several percentage points — thousands of dollars of car.
- Down payment. Every dollar down is a dollar of car you don't finance — and getting to 20% keeps you from owing more than the car is worth.
- Loan term. A longer loan lifts the price you can "afford" but piles on interest, as the table above shows.
- The hidden costs. Insurance, fuel, maintenance and registration can rival the payment itself — which is exactly why the 20/4/10 rule budgets for total car costs, not just the loan.
Glossary
- 20/4/10 rule
- A car-buying guideline: 20% down, a term of 4 years or less, and total car costs under 10% of gross income.
- Underwater (upside-down)
- Owing more on your car loan than the car is worth — common early in a long loan with little down.
- Trade-in value
- What a dealer credits you for your current car, which counts toward your down payment.
- APR
- The annual percentage rate on your loan, set largely by your credit score.
Frequently asked questions
How much car can I afford on my salary?
A common guideline is to keep your car payment to about 10–15% of your gross monthly income. On a $60,000 salary that's roughly $500–$750 a month, which — with a modest down payment at today's rates — supports a car in the low-to-mid $20,000s to mid-$40,000s depending on your loan term. Enter your own numbers above for a personalized figure.
What is the 20/4/10 rule for buying a car?
The 20/4/10 rule says: put at least 20% down, finance for no more than 4 years (48 months), and keep your total monthly car costs — loan payment plus insurance, fuel and maintenance — under 10% of your gross monthly income. It's a conservative guideline that keeps you from being overextended on a depreciating asset.
Is it better to have a longer car loan to afford more car?
A longer loan lowers your monthly payment so you can buy a more expensive car, but you pay much more interest and stay "underwater" (owing more than the car is worth) far longer. Stretching from a 48-month to an 84-month loan can let you buy thousands more car while adding thousands in interest — see the term comparison table for the trade-off.
Should my car payment be based on gross or take-home pay?
The 20/4/10 rule uses gross (pre-tax) income, which is what this calculator uses by default. Because taxes reduce your actual take-home pay, basing the percentage on gross income is already somewhat conservative — but if money is tight, running the same percentages against your take-home pay gives you an even safer budget.
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