Car Loan Affordability Calculator
Determine how much car you can truly afford based on your ideal monthly payment.
Your Car Budget
Affordable Car Price
$0
Total Loan Amount
$0
Total Interest Paid
$0
This is an estimate for informational purposes and does not constitute financial advice.
About the Car Loan Affordability Calculator
This calculator helps you determine how much car you can truly afford by working backward from the number that matters most: your monthly payment. Instead of falling in love with a car and then trying to make the payments fit, this tool empowers you to start your search with a realistic budget. Enter your desired monthly payment, down payment, and loan terms to find your ideal car price.
Formula Explained
The calculator uses the present value of an annuity formula to find the total loan amount you can afford based on your monthly payment:
- P is the principal loan amount (the value we are solving for).
- M is your desired monthly payment.
- i is your monthly interest rate.
- n is the number of months in your loan term.
It then adds your down payment and accounts for sales tax to determine the final sticker price of the car you can afford.
How to Afford a Better Car (or Lower Your Payment)
You have several levers to pull to increase your buying power. Here are the most effective strategies:
Improve Your Credit Score
A higher credit score is the #1 way to get a lower interest rate, which dramatically increases how much you can borrow for the same monthly payment.
Increase Your Down Payment
Every extra dollar you put down is a dollar you don't have to finance. A larger down payment directly increases your affordable car price.
Shop for the Best Rate
Get pre-approved from multiple lenders, including credit unions and online banks, before you ever step into a dealership.
Choose a Shorter Loan Term
While a longer term lowers your payment, a shorter term (like 48 or 60 months) often comes with a lower interest rate, saving you money in the long run.
Frequently Asked Questions
How much should my car payment be? →
Financial experts often recommend the 20/4/10 rule for car buying: make a 20% down payment, finance the car for no more than 4 years (48 months), and keep your total monthly transportation costs (including payment, insurance, and fuel) under 10% of your gross monthly income. This calculator helps you work backward from a monthly payment you are comfortable with.
What is a good interest rate for a car loan? →
A 'good' interest rate depends heavily on your credit score and the current market. As of 2024, a borrower with excellent credit (780+) might get a rate around 5-6% for a new car, while a borrower with fair credit might see rates of 10-12% or higher. It's always best to get pre-approved from multiple lenders to find the best rate.
Does a longer car loan term lower my payment? →
Yes, a longer loan term (like 72 or 84 months) will result in a lower monthly payment. However, it also means you will pay significantly more in total interest over the life of the loan. Shorter loan terms are almost always more cost-effective if you can afford the higher payment.
Should I include sales tax in my car loan? →
Most people roll the sales tax into their auto loan for convenience. However, if you can afford to pay the sales tax upfront with your down payment, you will save money by not paying interest on that amount over the life of the loan.
How does a down payment affect my car loan? →
A larger down payment is always beneficial. It reduces the total amount you need to borrow, which lowers your monthly payment and the total interest you'll pay. It also helps prevent you from being 'upside down' on your loan, where you owe more than the car is worth.