A person making $60,000 per year can afford about a $40,000 car based on calculating 15% of their monthly take-home pay and a 20% down payment on the car of $7,900. However, every person's finances are different and you might find that a car payment of approximately $600 per month is not affordable for you.
There isn't one specific score that's required to buy a car because lenders have different standards. However, the vast majority of borrowers have scores of 661 or higher.
Even if you have no credit history, buying a car with an auto loan is still possible. But without strong credit, you're likely to pay a higher interest rate, unless you make a larger down payment, use a cosigner or find another way to keep your loan affordable.
It will take 47 months to pay off $40,000 with payments of $1,200 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
If you take a loan for five years and your interest rate is 4%, your monthly payment for a $40,000 loan will be $737. Remember that the longer the loan period, the more money you will overpay to the bank.
Aim to put at least 20% down on a new car and 10% down on a used car. That said, you'll need to base your down payment on what you can afford and what makes sense for your financial situation. If you're able to afford it, a larger down payment can lower your total loan costs.
Applying for a $40,000 loan
You'll have the most luck getting approved for a $40,000 loan with at least a very good credit score (at least 740), and a DTI ratio of 36% or lower.
NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars — although that can be a challenge for some people in today's market with high car prices. Ultimately, choosing the best auto loan term depends on balancing cost, affordability and your specific needs.
72 months equals 6 years. To figure this out, we recognize the well-known relationship between months and years. That is, there are 12 months in 1 year.
A $30,000 auto loan balance with an average interest rate of 5.0% paid over a 5 year term will have a monthly payment of $566. In total, the loan will cost $33,968 with $3,968 in interest.
NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment. Check if you can really afford the payment by depositing that amount into a savings account for a few months.
Final answer:
The monthly payment on a $60,000 car loan with a 1.99% interest rate over 72 months is $854.77.
For net monthly income, you're gonna need to make four thousand. six hundred and sixty seven dollars per month. So before taxes and other deductions, at a minimum. you'll need to make 70 thousand dollars per year. to afford a 40 thousand dollar car.
Every lender sets its own requirements for zero-down-payment deals, if they offer them at all. Generally, the credit score needed to buy a car is at least 661 whether you make a down payment or not. You could still get a car loan if your score is lower than 661, but be prepared to pay higher interest rates.
An increase in your monthly payment will reduce the amount of interest charges you will pay over the repayment period and may even shorten the number of months it will take to pay off the loan.
An example of the difference a loan's term can make: If you take out a $40,000 new car loan with an 84-month term at 9% APR, you would pay about $623 monthly and $12,369 in total interest over seven years.
Most lenders evaluate the following before making a lending decision: Credit: Your credit score shows how well you have handled past borrowed money. To qualify for a $40,000 loan, you'll typically need a credit score upwards of 670 or a co-signer with good or excellent credit.
For a $40,000 personal loan, lenders will likely require a strong credit score and history, along with proof of income or employment. Better credit scores can also lower your interest rate and secure improved loan terms.