Experts suggest that you should not allocate more than 20% of your take-home pay towards monthly auto payments. The down payment, interest rate, and term of your loan will also determine how much you can afford to buy. Use this calculator to help determine how much you might be able to spend on an automobile.
How Much Should I Pay a Month for a Car?
It’s easy to overpay for a car. Manufacturers do an excellent job advertising their products and making certain models seem like an identity choice. As a result, customers feel like they “have” to have that new car.
On top of that, figuring out the “drive off the lot” price can be difficult, since the prices are not especially set. Salespeople at dealerships can offer all kinds of extras, from features to extended warranties, which can seem like a great bargain. But, all of this can mean buyers end up paying a lot more than they can afford.
Plus, buyers also need to consider the cost of ownership. If they get financing, they need to think about how much they’re paying in interest. There are also insurance costs, gas, maintenance, tires, parking and other expenses to think about.
Before you go shopping, it’s important to have a very clear picture in your head of how much car you can afford. This way, when salespeople offer a slightly more expensive model or extra features, you know when to say “no.”
How to Decide on Your Automobile Budget
When deciding how much you can afford to pay for a car, consider:
- The costs of ownership
- Your down payment
- Your credit score, which will impact your financing costs
- How much debt you already have
- Your budget and expenses
- Your income
You can make your car more affordable by paying down your debts before you shop and working to improve your credit score. This can help you afford better interest rates on financing, which can help you afford your vehicle. You can also save up for a bigger down payment, which will help make your car more affordable.
Finally, be sure to research carefully. Look for a car matching your needs, then compare safety standards, maintenance costs and insurance expenses. Think long-term about the value you’re getting. Don’t rush the decision — only start the buying process one you’re confident about your desired features and budget.
You should also carefully consider the differences between a new car and a used car. A new car starts to depreciate almost right away. While a used car will not have the same “new car” smell, there are newer used models that even come with certifications and warranties in place. Used cars can save you thousands of dollars and can make ownership more affordable.
Use Our Calculator
Money Help Center has an estimated car payment calculator and other free calculators you can use to help you plan for life’s big purchases. Before you go to the dealership, use these resources to ensure you get the best car possible for the right price.