How much car can I afford?

On $6,500 a month gross with $8,000 down and a 60-month loan at 6.35%, you can afford a car of about $21,580. The 20/4/10 rule of thumb would stop at $19,117.

Before tax, e.g. $6,000
e.g. $250
Leave empty to use 10 % of income minus the costs above
e.g. $5,000
e.g. 7.5 %
e.g. 60 months
e.g. 6 %
More options
e.g. $4,000

Car price you can afford $21,580

Monthly payment
$290.00/mo
Largest loan
$14,875
Interest over the loan
$2,525
Price the 20/4/10 rule allows
$19,117

The catch

On 60 months your budget carries a $21,580 car, but the 20/4/10 rule of thumb (20% down, a 4-year loan, car costs under 10% of gross income) stops at $19,117: $2,463 of that price is paid for with a longer loan, not a bigger budget.

Share this case

How the calculator works

The calculator starts from what you can pay each month: either the budget you type in, or 10 % of your gross monthly income minus your other monthly car costs. It turns that payment into the largest loan it can repay at your APR and term, adds the down payment and trade-in, and removes the sales tax to give a sticker price.

It then runs the same arithmetic under the 20/4/10 rule: a 48-month term and a price where your down payment is at least a fifth. The gap between the two prices is the part of your budget that only a longer loan makes possible.

Calculated by AutoCalca with the same engine that runs the calculator above and the worked example below.

Worked example

The calculator above opens on this case: Household on $6,500 a month gross with $8,000 saved.

What goes in

Gross monthly income
$6,500
Insurance, gas and upkeep a month
$360
Down payment
$8,000
Interest rate (APR)
6.35 %
Loan term
60 months
Sales tax
6 %

What comes out

Car price you can afford
$21,580
Monthly payment
$290.00/mo
Largest loan
$14,875
Interest over the loan
$2,525
Price the 20/4/10 rule allows
$19,117

The catch in this case: On 60 months your budget carries a $21,580 car, but the 20/4/10 rule of thumb (20% down, a 4-year loan, car costs under 10% of gross income) stops at $19,117: $2,463 of that price is paid for with a longer loan, not a bigger budget.

What to know in the US

There is no legal limit on how much of your income a car can take. The 20/4/10 rule is personal-finance guidance: put at least 20 % down, finance for no more than four years, and keep all car costs (payment, insurance, fuel) under 10 % of gross monthly income. Lenders will usually approve far more than that, which is exactly why a rule of thumb is useful.

Insurance is the cost people forget. Premiums vary widely by state, age and driving record, so enter your own quote in the other monthly car costs field rather than relying on a national average.

Questions people ask

What is the 20/4/10 rule for buying a car?

At least 20 % down, a loan of at most 4 years, and total monthly car costs under 10 % of gross income. It is a rule of thumb from personal-finance writers, not a lending regulation.

How much should my car payment be?

Many planners suggest keeping the payment, insurance and fuel together near 10 % of gross income. The calculator takes your own monthly budget if you prefer a different limit.

Why does a longer loan let me afford more car?

Spreading the same payment over more months supports a bigger loan, but you pay more interest and stay in debt longer. The catch shows how much of the price depends on the longer term.

Sources

Last reviewed: