Car Affordability Calculator
Enter your monthly budget and we'll calculate the maximum car price you can afford — including tax, fees, and a check against the 20/4/10 rule financial advisors recommend.
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Tell us your monthly budget and we'll calculate the maximum car price you can afford.
The True Cost of a Car
Cars Depreciate. Fast.
Unlike homes, cars are depreciating assets. A new car loses roughly 15–20% of its value the moment you drive it off the lot — before you've made a single payment. By year five, the average car has lost about 60% of its purchase price. This is why longer loan terms are especially risky: you can end up "underwater" (owing more than the car is worth) for years, making it impossible to sell or trade in without bringing cash to the table.
The Real Monthly Cost
The loan payment is only part of what a car costs. Add insurance ($100–$300/mo depending on coverage and location), gas ($100–$300/mo depending on commute and vehicle), maintenance ($50–$100/mo average), and registration/inspection annually. A $400/mo car payment can easily become $900/mo in total car expenses. Financial advisors recommend keeping all car expenses under 15–20% of take-home pay.
Dealer Financing vs. Pre-Approval
Dealers make money on financing — they markup the rate they get from the lender (the "buy rate") and pocket the difference. This is called dealer reserve and can add 1–3% to your rate without you knowing. The counter: get pre-approved from your bank or credit union before you walk into a dealership. Then you can compare their offer and negotiate from a position of knowledge. Credit unions typically beat bank rates on auto loans.
Leasing vs. Buying
Lease
- • Lower monthly payment
- • Drive a new car every 3 years
- • No long-term asset (you return it)
- • Mileage limits (typically 10–15k/yr)
- • Wear-and-tear charges at return
- • Best if you drive under 15k miles/yr
Buy
- • Higher monthly payment
- • Build equity over time
- • No mileage limits
- • Customize freely
- • Payment-free years once paid off
- • Best for high-mileage drivers
The 20/4/10 Rule Explained
A simple heuristic from personal finance: put at least 20% down, finance for no more than 4 years (48 months), and keep total car expenses (payment + insurance + gas) under 10% of gross monthly income. It's conservative — many people break one rule — but breaking all three simultaneously is a reliable sign of financial overextension. A car purchased at the outer limits of this rule leaves no margin for job loss, unexpected repairs, or life changes.