How much car can I afford?
Last updated: October 2022
Wondering what vehicle prices are within your means? This auto loan calculator helps you figure out what price you can afford to pay for a vehicle based on the size of your down payment, the interest rate and terms of the loan, the trade-in value of your vehicle and any applicable rebates. Your credit history may also impact the terms of your loan. Research your credit score from a reputable source before you begin negotiating a loan.
How to calculate car affordability
Using the calculator is simple. It comes with four inputs below – enter the value of each and the calculator will give you an estimated price tag you might be able to afford if you were to finance your vehicle. Play around with the values until you land on something that seems right for you.
What is a monthly payment?
Financing a vehicle involves taking out a loan from a bank or other financial institution. You then pay the loan back in monthly installments until the loan is paid off or you sell your vehicle.
Enter a monthly payment that you think you could budget for each month and the calculator can help you determine an estimated vehicle price that works with your budget.
What is a loan term?
A loan term describes how many months it’ll take to pay off your loan. The length typically determines whether the total loan cost will be higher or lower, says the Consumer Financial Protection Bureau.
A longer loan, for instance, typically means lower monthly payments – but it may allow you to buy a more expensive car, according to Bankrate. Shorter loans have higher monthly payments but a reduced total loan cost.
What is a down payment?
The down payment is the amount you pay upfront toward the loan. The higher the down payment, the better rates you may qualify for, says Bankrate. And better rates could allow you to buy a more expensive vehicle.
A down payment of 10% to 20% is standard. But, if it’s within your budget, you can always put down more for better loan terms.
What is an interest rate and how is it calculated?
In 2022, interest rates were just below 4% (on average), according to Forbes. But they depend heavily on your credit score. The higher your credit score, the lower your interest rate is likely to be.
What is a credit score?
Lenders of all kinds typically use credit scores to help determine how likely you are to make timely payments – and pay off the loan completely, says the CFPB. Several factors go into calculating your credit score, including but not limited to:
- Payment history
- Available credit
- Any foreclosures or bankruptcies
The reason interest rates are higher for lower credit scores is because lenders want to combat that perceived risk. That’s why increasing your credit score can help you land better rates.
How does trade-in value work?
A trade-in is when you sell your current vehicle to a car dealer, and that amount is subtracted from the value of a new vehicle purchase, according to U.S. News. A representative at the dealership will appraise your vehicle and you can decide whether you want to trade it in.
Trade-ins are quick and simple compared to private sales – everything is done in one place.