How Much Car Can I Actually Afford? (2024)

FAQs

How Much Car Can I Actually Afford? ›

It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.

Financial experts recommend that your monthly payment should be around 10% to 15% of your monthly take-home pay. Additionally, your total monthly car expenses should be no more than 20% of your monthly income, and this includes your car payment, insurance, maintenance and gas.

on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000. And at 150 k salary, that means your max car price should be 50 2500.

Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.

To get an idea of how much car you can afford, a good rule of thumb is to pay no more than 35% of your annual pre-tax income. So, if you make $50,000 before taxes per year, your car purchase price should not exceed $17,500.

There's no perfect formula for how much you can afford, but our short answer is that your new-car payment should be no more than 15% of your monthly take-home pay. If you're leasing or buying used, it should be no more than 10%.

According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

How much should I spend on a car if I make $60,000? If your take-home pay is $60,000 per year, you should pay no more than $750 per month for a car, which totals 15% of your monthly take-home pay.

As an individual, you may find that $40,000 is a good entry-level salary. Couples living the DINK lifestyle (which stands for dual income, no kids) and who each make $40,000 would be well above the median household income. Plus, they would have the additional costs of raising children as part of their budget.

According to a Ramsey Solutions article, if you wonder what type of car you can afford, the answer is simple: “The car you can afford is the car you can pay for in cash.” “And as a general rule, the total value of all your vehicles combined shouldn't be more than half your annual income,” according to the article.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.

For example, if you want to save up $3,000 to buy a car in three months, you would need to save $1,000 per month to make it happen. If you have the flexibility to do so, extending your car-buying timeline can make it easier to save up a larger sum.

Key takeaways. Buying a new car allows for customization and the latest technology, but it comes at a higher price and depreciates quickly. Used cars are less expensive and slower to depreciate, but may require compromises and can come with higher maintenance costs.

The 20/4/10 rule is a general guide to car buying. It advises that you put 20% down on a 4-year auto loan and spend 10% of your salary on transportation costs. So, if you're interested in a $20,000 car, you would put 20% down, or $4,000.

The rule states that you should spend no more than 1/10th your gross annual income on the purchase price of a car. The car can be new or old. It doesn't matter so long as the car costs 10% of your annual gross income or less.

Using an average interest rate, and a car payment calculator, you can afford a $19,000-20,000 car on a $70k salary using the 20/4/20 rule of car buying.

How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.

If you wanted to stick to this rule of thumb and buy a $50,000 car, you would need a monthly take-home income of at least $7,240 if you got a car loan at a below-average rate and stretched out your payoff time for a long time. Many people will find that purchasing such an expensive car really isn't affordable.

It consists of three parts: a down payment of at least 20% of the car's price, limiting the loan term to three years, and ensuring that your car payment does not exceed 8% of your monthly income. This Rule is not just about numbers; it's a strategic approach to avoid financial strain due to an auto loan.