Car Affordability Calculator
The most you should spend on a car, from your budget or your payment
Last updated: October 2026
Budget
10% to 15% is typical
Loan and purchase
Where the money goes
- Sales tax on the purchase: $1,137.97
- Total interest over the loan: $2,495.92
- Total paid for the car, including interest, tax and fees: $26,200.00
20/4/10 check
- Pass: at least 20% down (cash plus trade-in equity).
- Pass: a loan term of 4 years (48 months) or less.
- Miss: car costs ($750 a month) exceed under 10% of gross monthly income ($708).
How the calculator works
1. The payment. In income mode, your car budget is take-home pay times the share you choose. Insurance, fuel and upkeep come out first; what is left is the most you can put toward a loan payment.
2. The loan. The payment is turned into a loan amount with the standard loan formula run in reverse: loan = payment x (1 - (1 + i)-n) / i, with i the monthly rate. At 0% APR, loan = payment x months.
3. The price. Loan plus cash down plus trade-in equity must cover the price, the sales tax and the fees. The calculator solves for the price that uses exactly that much.
Worked example
- Take-home pay is $5,000 a month and you set aside 15%: $750 for everything car-related.
- Insurance $180, fuel $120 and upkeep $50 leave $400 for the payment.
- At 7% APR for 48 months, $400 a month supports a loan of $16,704.08.
- Add $4,000 cash and a $3,000 trade-in, with 6% sales tax after the trade credit and $600 of fees: you can afford a car priced at about $21,966.
- On $85,000 gross income, 10% is $708 a month, so the $750 all-in cost misses that part of the 20/4/10 guideline slightly. The down payment passes: $7,000 of cash and trade-in is about 32% of the price.
2026 rule worth knowing
Interest on a loan for a new, US-assembled personal vehicle bought after 2024 is deductible up to $10,000 a year through 2028, phasing out above $100,000 of modified AGI ($200,000 married filing jointly). It lowers your tax, not your payment, so this calculator leaves it out of the budget.
Frequently Asked Questions
How much car can I afford?
A common guideline is to keep all car costs, including the loan payment, insurance, fuel and maintenance, to about 10% to 15% of take-home pay. On $5,000 a month take-home, 15% is $750. If insurance, fuel and upkeep take $350 of that, $400 is left for the payment, which at 7% over 48 months supports a $16,704 loan.
What is the 20/4/10 rule for buying a car?
Put at least 20% down, finance for no more than 4 years, and keep total monthly car costs under 10% of gross income. It is a conservative rule of thumb rather than a lender requirement, designed to keep you from owing more than the car is worth and to leave room in your budget. This calculator checks your plan against each part.
How do I work out the loan amount from a monthly payment?
Loan = payment x (1 - (1 + i)^-n) / i, where i is the APR divided by 12 and n the number of months. $500 a month at 6% for 60 months supports $25,862.78. At 0% APR the loan is simply payment x months: $500 x 60 = $30,000.
Does my trade-in reduce sales tax?
In most states, yes: sales tax is charged on the price minus the trade-in value. A few states tax the full price regardless. Use the toggle to match your state. If you owe more on the trade than it is worth, that negative equity reduces what you can spend on the next car.
Is car loan interest tax deductible in 2026?
For 2025 through 2028, you can deduct up to $10,000 a year of interest on a loan for a new personal-use vehicle whose final assembly was in the United States, whether or not you itemize. The deduction phases out above $100,000 of modified AGI ($200,000 married filing jointly). Used cars and leases do not qualify.
Should I choose a longer loan to lower the payment?
A longer term lowers the payment but raises the total interest and keeps you underwater longer, because cars lose value fastest in the first years. If a car only fits your budget at 72 or 84 months, a cheaper car is usually the better answer.