A common budgeting rule of thumb is keeping your total monthly vehicle costs — loan payment, insurance, and fuel combined — under roughly 15-20% of your take-home pay. That’s different from just looking at the loan payment alone, since insurance and maintenance can add a significant amount on top. Before you start shopping, it helps to work backward: decide on a monthly amount you’re comfortable with, then use our car loan calculator to see what vehicle price that actually supports at your expected interest rate and term.
Your affordability also depends heavily on the loan term you choose, since stretching a loan to 72 or 84 months lowers the monthly payment but increases total interest paid — a tradeoff explained fully in car loan term length: 36 vs 60 vs 72 months. Once you have a target loan amount in mind, it’s worth double-checking the resulting monthly figure against your actual take-home income using our car payment calculator, which factors in tax and trade-in value for a more complete picture.