# Car Affordability Calculator

URL: https://speedycalculator.com/calculators/finance/car-affordability/
Last updated: 2026-10-25

> The car affordability calculator works out the most expensive car you can afford from the monthly payment you're comfortable with, your down payment and trade-in, the loan rate and term, sales tax and fees – and checks it against the 20/4/10 rule.

## Inputs

- Affordable monthly payment
- Down payment
- Trade-in value
- Interest rate (%)
- Loan term (years, months)
- Sales tax (%)
- Fees
- Gross monthly income

## Results

- Maximum loan
- Car price you can afford
- Sales tax
- Total interest
- Payment as a share of gross income
- 20/4/10 check

## Formula

```
Maximum loan = payment × (1 − (1 + i)^−n) ÷ i
Maximum price = (maximum loan + down payment + trade-in − fees) ÷ (1 + sales tax)
20/4/10 rule: 20% down, at most 4 years, total car costs ≤ 10% of gross income
```

## Explanation

The 20/4/10 rule keeps a car from straining your budget. Remember that insurance, fuel, maintenance and depreciation often cost as much as the payment itself.

### How to use the Car Affordability Calculator

- **Affordable monthly payment**
- **Down payment**
- **Trade-in value**
- **Interest rate**
- **Loan term**
- **Sales tax**
- **Fees**
- **Gross monthly income**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter the monthly payment you can afford, your down payment, trade-in value, interest rate, term, sales tax, fees and gross monthly income.

### Tips

- Use your real spending from bank statements rather than guesses.
- Automate savings so they happen before you spend.
- Revisit your plan once a year or after any big life change.
- Keep an emergency fund before investing for long-term goals.

### Common mistakes to avoid

- Underestimating irregular expenses such as car repairs, gifts and annual bills.
- Ignoring inflation for long-term goals.
- Taking on high-interest debt to fund wants.

### Inputs explained

FieldWhat to enterAffordable monthly paymentAmount in your currencyDown paymentAmount in your currencyTrade-in valueAmount in your currencyInterest rateIn %Loan termUnits: years, monthsSales taxIn %FeesAmount in your currencyGross monthly incomeAmount in your currency

### What each result means

- **Maximum loan** = pvann([Interest rate]÷1200, [Loan term], [Affordable monthly payment])
- **Car price you can afford** = ([Maximum loan] + [Down payment] + [Trade-in value] - [Fees])÷(1 + [Sales tax]÷100)
- **Sales tax** = [Car price you can afford]×[Sales tax]÷100
- **Total interest** = [Affordable monthly payment]×[Loan term] - [Maximum loan]
- **Payment as a share of gross income** = [Affordable monthly payment]÷[Gross monthly income]×100

### Example values

How the main result changes when **Affordable monthly payment** changes and everything else stays at the example values above:

Affordable monthly paymentCar price you can afford25015,364.5337520,243.0650025,121.5962530,000.1275034,878.651,00044,635.7

## Worked example

Inputs — Affordable monthly payment: $500; Down payment: $4,000; Trade-in value: $3,000; Interest rate: 7 %; Loan term: 4 years; Sales tax: 7 %; Fees: $1,000; Gross monthly income: $6,000.

Results — Maximum loan = $20,880.10; **Car price you can afford = $25,121.59**; Sales tax = $1,758.51; Total interest = $3,119.90; Payment as a share of gross income = 8.33 %; 20/4/10 check = Meets the 20/4/10 rule.

## FAQ

**How much car can I afford?**
Total car costs of at most 10–15% of gross income is a common guideline.

**What is the 20/4/10 rule?**
Put 20% down, finance for no more than 4 years and keep costs under 10% of income.

**Should I buy new or used?**
A 2–3-year-old car avoids the steepest depreciation.

**What formula does the Car Affordability Calculator use?**
Maximum loan = payment × (1 − (1 + i)^−n) ÷ i.


## Sources

- [Consumer Financial Protection Bureau](https://www.consumerfinance.gov/)