How much should you spend on a car?
Popular guidelines keep total car costs, the loan payment plus insurance, at about 10% to 15% of your gross monthly income. The stricter 20/4/10 rule says: put at least 20% down, finance for no more than 4 years, and keep total car costs under 10% of gross income. Fuel and maintenance come on top, so the lower your share, the more room you leave for everything else.
How the calculator works
Max payment = car budget − insurance
Max loan = payment × (1 − (1 + r)−n) ÷ r, r = APR ÷ 1200
Max price = (max loan + down payment) ÷ (1 + tax rate)
Worked example
You earn $6,000 a month before tax and want to keep car costs at 15%, which is $900. Insurance takes $150, leaving $750 a month for the loan. At 6.5% APR for 60 months that payment supports a loan of about $38,332. Add a $4,000 down payment and allow 7% for tax and fees, and the most you should pay is about $39,562.
Using the 20/4/10 rule instead (10%, 48 months), the same income supports a much smaller budget: $600 a month minus $150 insurance leaves $450 for the payment.
Budget by income
| Gross monthly income | 10% of income | 15% of income |
|---|---|---|
| $3,000 | $300 | $450 |
| $4,500 | $450 | $675 |
| $6,000 | $600 | $900 |
| $8,000 | $800 | $1,200 |
| $10,000 | $1,000 | $1,500 |
Ways to afford more car for less
- Get pre-approved by a bank or credit union so you know your real rate before you shop.
- Look at two or three year old cars. They have already taken the steepest depreciation hit.
- Get an insurance quote first. Insurance can vary by hundreds of dollars a year between models.
- Count fuel too. Use the fuel cost calculator to compare running costs.
Found a car? Check the exact payment with the car loan calculator or compare leasing with the car lease calculator.
Frequently asked questions
How much car can I afford on my salary?
A common guideline is to keep the car payment plus insurance at 10% to 15% of your gross monthly income. On $6,000 a month that is $600 to $900 for payment and insurance combined.
What is the 20/4/10 rule for buying a car?
Put at least 20% down, finance for no more than 4 years, and keep total monthly car costs, including insurance, under 10% of your gross income.
Should I base my car budget on gross or take-home pay?
Most rules of thumb use gross income, but if you have high housing costs or other debt, basing the budget on take-home pay is safer.
Does a longer loan let me afford a more expensive car?
It lowers the payment, so the calculator will show a higher price, but you pay more interest and stay upside down on the loan longer. Shorter terms are usually the better deal.
More car calculators
Last updated October 2026.