Car Affordability Calculator
Most car shopping happens backwards: pick a car, then discover the payment. This calculator runs the other way. Start from the monthly payment you can comfortably afford, and see the maximum car price that fits, given your interest rate, loan term, down payment and any trade-in.
Decide the number before visiting a dealership. "What monthly payment are you looking for?" is the classic opening for stretching the term until almost any car fits. Knowing your price ceiling, and the total interest behind each term, keeps the negotiation anchored on the price of the car.
From payment to price
The calculator inverts the standard loan payment formula to find the largest loan your budget covers:
Max loan = Payment × (1 − (1 + r)−n) ÷ r
Max car price = Max loan + Down payment + Trade-in
r is the monthly rate (APR ÷ 12) and n the number of months. Longer terms raise the price that fits the same payment, but every added year adds interest and extends the time you owe more than the car is worth.
Worked example
A budget of $400/month at 7% APR with $3,000 down and no trade-in:
| Term | Max car price | Total interest |
|---|---|---|
| 36 months | ≈ $15,950 | ≈ $1,450 |
| 60 months | ≈ $23,200 | ≈ $3,800 |
| 84 months | ≈ $29,500 | ≈ $7,100 |
Same payment, three very different cars. The 84-month option costs about $5,700 more interest than the 36-month loan and commits you to seven years of payments on a depreciating asset.
Rules of thumb worth knowing
Two popular guardrails. The 20/4/10 rule: put at least 20% down, finance for no more than 4 years, and keep total vehicle costs (payment, insurance, fuel) under 10% of gross income. The simpler version: keep all car costs under about 15% of take-home pay. Both exist because the payment is only the visible cost. Insurance, fuel, servicing and depreciation typically add as much again. The fuel cost calculator covers the fuel line.
The result excludes sales tax, registration and dealer fees, which can add 5–10% depending on where you live. Getting pre-approved for a loan at your bank or credit union before shopping gives you a rate to beat.
Frequently asked questions
How much car can I afford on my salary?
Common guidance caps all car costs (payment, insurance, fuel and maintenance) at 10–15% of take-home pay. On $4,000/month take-home, that is $400–600 for everything, which typically supports a payment of $250–400 once running costs are counted.
Is a 72 or 84 month car loan a bad idea?
Long terms lower the payment but raise total interest and keep you "underwater" (owing more than the car's value) for years. That hurts if the car is totaled or you need to sell. If a car only fits your budget at 72–84 months, shop for a cheaper car.
Does a trade-in reduce my loan?
Yes. Its value acts like extra down payment, reducing the amount financed dollar for dollar, and in many US states reducing the taxable amount too. Negotiate the car's price and the trade-in value separately.
Why does the dealer keep asking about my monthly payment?
Because stretching the term can make almost any price hit your target payment. Anchor negotiations on the out-the-door price instead, and bring your own financing pre-approval so the loan terms are compared, not assumed.
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Last updated . Formulas are shown on the page and checked against the worked example.
This calculator is for general information and education only. It is not professional advice. Confirm important decisions with a qualified adviser.