Car Affordability
How much car can you afford
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Car Affordability is built to answer one question: how much car can you afford? The working sits next to it. Fill in Monthly Income ($), Monthly Expenses ($) and Down Payment ($) on Car Affordability and read your answer immediately. In Car Affordability the working sits beside the answer. Car Affordability replaces guesswork. You can disconnect once Car Affordability has loaded; the arithmetic runs locally. Car Affordability sits in the Auto & Transport section next to related tools and free online car affordability calculator. Car Affordability is great for comparing scenarios. Change one value and watch. Start with Car Affordability; the first number takes seconds.
What the defaults give
$5,000 income less $2,500 of expenses leaves $2,500, of which 15% is $375 a month for a car payment.
At 7% over 60 months that services an $18,938 loan, so the car budget is $23,938 including the down payment.
The formula
Available payment = (income − expenses) × 0.15
Max loan = payment × ((1 + i)ⁿ − 1) ÷ (i × (1 + i)ⁿ), where i is the monthly rate and n the term
Max car = max loan + down payment
The second line is the standard loan present-value formula: it asks how much debt a fixed monthly payment can carry at a given rate for a given number of months. Lower rates and longer terms both raise the loan a payment supports, which is why the term input changes the answer so much.
Worked examples
$5,000 income, $2,500 expenses, 7%, 60 months → $375/month, loan $18,938, car $23,938
Same with $10,000 down → car $28,938 (the loan does not change)
Same at 3.5% → car $25,614
Same at 14% → car $21,116
Same over 30 months → car $15,293
Same over 120 months → car $37,297
The 120-month row is the trap. Stretching the term buys $18,000 more car for the same monthly payment, and also doubles the interest paid and leaves the loan underwater for years. A car depreciates faster than a long loan amortises.
Where the 15% comes from
Fifteen percent of disposable income is a common budgeting ceiling for a vehicle payment, chosen so that insurance, fuel, maintenance, tyres and registration still fit alongside it. Those running costs are not in this number. On a $24,000 car they typically add $200 to $400 a month, which can be as much as the payment itself.
A stricter view is the total-cost rule: keep all vehicle spending under 20% of take-home pay. That includes the loan, insurance, fuel and a maintenance reserve, and it usually points to a cheaper car than the payment-only rule does.
Limits
The model assumes a clean credit profile and the rate you entered. Dealer financing, negative equity on a trade-in, sales tax and gap insurance all change what is actually financed. When expenses exceed income the payment is zero and the result is the down payment alone, which is the calculator saying no rather than a valid budget.
Frequently Asked Questions
How much car can I afford on $5,000 a month?
$23,938 with $2,500 of expenses and a $5,000 down payment. The payment is $375, which finances $18,938 at 7% over 60 months.
Why 15% of disposable income?
It leaves room for insurance, fuel, tyres and maintenance inside the same budget. Those costs are not part of the payment and often add a few hundred a month.
Does a longer term let me buy more car?
Arithmetically yes: 120 months instead of 60 raises the budget from $23,938 to $37,297. It also doubles the interest and leaves you owing more than the car is worth for years.
Is insurance included?
No. Only the loan payment is modelled. Comprehensive cover on a financed car is compulsory and can add a significant monthly cost on top.
What if my expenses exceed my income?
The available payment becomes zero and the result is just the down payment. That is a signal to fix the budget before financing anything.
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