The affordability formula
Price = (Loan + Down + Trade − Fees) ÷ (1 + Tax)
- Budget — gross monthly income × 10–15%
- Payment — budget − insurance − fuel
- Loan — payment × ((1+r)n − 1) ÷ (r(1+r)n)
Free buyer tool
How Much Car Can I Afford?
Turn your monthly income into a realistic shopping price — after insurance, fuel, taxes and fees — before a dealer tells you what you can "afford."
Quick answer
Keep total car costs under 10% of gross monthly income (up to 15% if you have little other debt). With $6,000/month income, $250 for insurance and fuel, $4,000 down and 8.5% APR over 48 months, you can afford a car of roughly $16,698.
Share of income for car costs
Loan term
Affordable price by income
| Annual income | 10% budget | Est. car price |
|---|---|---|
| $40,000 | $333/mo | $6,491 |
| $60,000 | $500/mo | $12,870 |
| $80,000 | $667/mo | $19,250 |
| $100,000 | $833/mo | $25,629 |
| $150,000 | $1,250/mo | $41,576 |
Assumes $250/mo insurance and fuel, $4,000 down, 8.5% APR, 48 months, 6% tax, $500 fees.
Car affordability FAQ
How much car can I afford?
A common guideline is to keep total car costs — loan payment, insurance and fuel — at or below 10% to 15% of your gross monthly income. On a $6,000/month income, that is $600–$900 per month for everything car-related.
What is the 20/4/10 rule?
Put at least 20% down, finance for no more than 4 years (48 months), and keep total monthly car costs under 10% of gross income. It keeps you out of negative equity and limits interest.
Should I base my budget on gross or take-home pay?
Most rules use gross (pre-tax) income. If your budget is tight, run the numbers on take-home pay instead for a safer, more conservative price.
Does a bigger down payment let me afford more car?
Yes. Every dollar of down payment or trade-in equity adds directly to the price you can afford, and it reduces interest and the risk of owing more than the car is worth.
How does my credit score affect affordability?
A lower credit score means a higher APR, so the same monthly payment buys less car. Moving from 17% to 7% APR on a 60-month loan can raise your affordable price by several thousand dollars.