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
| Field | What to enter |
|---|---|
| Affordable monthly payment | Amount in your currency |
| Down payment | Amount in your currency |
| Trade-in value | Amount in your currency |
| Interest rate | In % |
| Loan term | Units: years, months |
| Sales tax | In % |
| Fees | Amount in your currency |
| Gross monthly income | Amount 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 payment | Car price you can afford |
|---|---|
| 250 | 15,364.53 |
| 375 | 20,243.06 |
| 500 | 25,121.59 |
| 625 | 30,000.12 |
| 750 | 34,878.65 |
| 1,000 | 44,635.7 |
Formula
Maximum loan = payment × (1 − (1 + i)^−n) ÷ iMaximum 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 incomeWorked 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.
Frequently asked questions
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.