Car Affordability Calculator
Buying a car is the second-largest purchase most households make, yet it is easy to overextend on a vehicle and leave too little budget for housing, savings, and emergencies. The 15% rule of thumb states your monthly car payment should not exceed 15% of your gross monthly income. A related guideline caps all car-related costs (payment, insurance, fuel, and maintenance) at 20% of gross monthly income. This calculator applies the 15% rule to your income to find your recommended maximum monthly payment, then works backward through the loan amortisation formula to estimate the maximum car price you can finance given your down payment, trade-in value, loan interest rate, and loan term. It also provides an estimated total monthly ownership cost by adding approximate insurance, fuel, and maintenance costs to your payment, and compares this to the 20% all-in threshold. These guidelines are conservative; many people spend more, but financial planners advise keeping car costs in check to protect long-term wealth building. Use this figure as a starting ceiling when you visit dealerships.
Max monthly payment: -- | Max car price: --
How the car affordability formula works
The maximum monthly payment is 15% of your gross monthly income. The maximum loan amount is derived from the standard annuity present value formula: Loan = P × ((1 - (1 + r)^-n) / r), where P is the maximum payment, r is the monthly interest rate, and n is the loan term in months. The maximum car price equals the loan amount plus your down payment and trade-in value.
Insurance is estimated at $140 per month (roughly $1,680 per year, which is near the US national average). Fuel and maintenance are estimated at $200 per month combined. These are approximations; your actual costs will depend on your vehicle, location, and driving habits.
Car affordability: frequently asked questions
What is the 15% rule for car buying?
The 15% rule recommends that your monthly car payment should not exceed 15% of your gross monthly income. A stricter version extends this to 20% of gross monthly income for all car-related costs combined, including payment, insurance, fuel, and maintenance. Staying within these thresholds helps ensure car costs do not crowd out savings and other financial priorities.
What is a good loan term for a car?
Financial advisers commonly recommend keeping auto loans to 48 to 60 months (4 to 5 years). Longer terms of 72 to 84 months reduce the monthly payment but result in paying significantly more interest and can leave you owing more than the car is worth (negative equity) due to rapid depreciation in the early years.
Should I include a trade-in value?
Yes. If you are trading in a vehicle, the dealer will apply its value to reduce the amount you finance. Enter your trade-in's estimated value to see the net loan amount and resulting monthly payment. You can check trade-in values through Kelley Blue Book (kbb.com) or NADA Guides.
What are typical car ownership costs beyond the payment?
Beyond the monthly loan payment, budget for auto insurance (national average around $1,600 to $2,000 per year), fuel, routine maintenance (oil changes, tyres, brakes), and registration fees. These ongoing costs can add $300 to $600 per month or more depending on the vehicle type, your location, and driving habits.
Does this calculator include sales tax and fees?
The car price inputs are the vehicle's purchase price before taxes and fees. In practice, sales tax, registration, title, and dealer fees increase the total amount financed. Add approximately 8% to 12% to the purchase price to estimate the total out-the-door cost in most US states.
References
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. Insurance and running cost estimates are national averages for illustrative purposes. See our methodology.