How Much Car Can I Afford?
The car price your monthly budget, down payment and loan rate add up to.
Good to know. Start from the payment you can live with and work back to the price, not the other way round.
Not financial advice. Uses only the numbers and rates you enter — no live data.
How it works
In plain words
The loan a payment repays is the value today of all the payments at the loan’s rate. Add the down payment and trade-in, and take off the sales tax, to get the price.
The formula
loan = payment × (1 − (1 + i)⁻ⁿ) ÷ i, where i = APR ÷ 12 price = (loan + down + trade × (1 + tax)) ÷ (1 + tax)
Worked example
500 a month for 60 months at 7% repays a loan of 25,251.00. With 5,000 down, that buys a car of 30,251.00, and the interest comes to 4,749.00.
Sources
- Brealey, Myers and Allen, Principles of Corporate Finance, chapter 2 The standard formulas for loan payments, compounding and present value, the same as a spreadsheet’s PMT and FV.
Sources checked October 3, 2026. 4 automated tests check its answers on every change.
About this calculator
Most people shop for a car by the monthly payment, so this calculator starts there and works back to the price. The payment you can afford, the rate and the term decide how much you can borrow; the down payment and any trade-in add to that.
A longer loan makes the same payment buy a more expensive car, but at a cost: 500 a month at 7% buys about 25,000 of loan over 60 months and about 29,300 over 72, with much more interest. Cars also lose value fastest in the first years, so a long loan can leave you owing more than the car is worth.
A common rule of thumb is 20/4/10: put at least 20% down, borrow for no more than four years, and keep the payment, insurance and fuel under 10% of your gross income. It is cautious on purpose, and a good check on what the lender is willing to offer.
Remember the costs the payment leaves out: insurance, fuel or charging, maintenance and registration. The cost of owning a car calculator adds them up, and the car loan calculator shows the payment for a price you already have in mind.
Questions people ask
How much car can I afford on 500 a month?
At 7% over 60 months, 500 a month repays about 25,250. Add your down payment and trade-in to get the price, less any sales tax.
What is the 20/4/10 rule?
Put at least 20% down, finance for no more than four years, and keep the total of payment, insurance and fuel under 10% of your gross income.
Is a longer car loan a good idea?
It lowers the payment but raises the total interest, and a car loses value fastest early on, so you may owe more than it is worth for longer.