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Financial experts say to **not spend more than 35% of your annual income** on the car itself and the costs that come with your purchase. Below you'll find a breakdown of what to consider when buying a new or used car and how much you should spend.

To find out how much car you can afford with this 36% rule, simply **multiply your family's income by 0.36**. So if you earn $100,000, for example, you could afford to take out a car loan of up to $36,000 — assuming you don't have any other debt.

According to experts, **a car payment is too high if the car payment is more than 30% of your total income**. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

- Shop around and get rate quotes at least once a year.
- Make sure you're taking advantage of any available insurance discount.
- Bundle your insurance coverage.
- Keep your insurer updated about any changes.
- Drop coverage you no longer need.

It's simple: **Spend no more than 10% of your gross annual income on the purchase price of a car**. Why? Because the upfront cost of a vehicle isn't going to be the only thing you pay for, and cutting down your base price budget is the most effective way to save money.

Financial experts say to **not spend more than 35% of your annual income** on the car itself and the costs that come with your purchase. Below you'll find a breakdown of what to consider when buying a new or used car and how much you should spend.

The pandemic and resulting supply-chain issues, inflation, rising interest rates all play a part. Depending on whom you ask, the average car buyer in the U.S. is paying $657 (Edmunds.com) or $712 (Moody's) a month for their new vehicles.

If you make $75,000 per year, your total loan payments shouldn't exceed **$2,250 per month**. The 20/4/10 rule: Put down 20% on a car, finance the car for no more than 4 years, and keep your car payment less than or equal to 10% of your salary.

It's typically recommended that you buy a car worth no more than 35% of your gross annual income— so if you make $60k per year, you can afford a new car that is worth **$21,000 or less**.

**2020 Hyundai Sonata**. The 2020 Hyundai Sonata is one of the midsize cars you can afford if you pull down a $50K salary. With good credit, the $390 monthly payments are affordable for those in that salary range.

The 50% rule

Some experts believe that spending **50% of your salary** on a vehicle should be affordable. With a salary of $75k this would give you $35,000 to spend on a car which is enough for a brand new car.

Whether you're paying cash, leasing, or financing a car, your upper spending limit really shouldn't be a penny more than **35% of your gross annual income**. That means if you make $36,000 a year, the car price shouldn't exceed $12,600. Make $60,000, and the car price should fall below $21,000.

The frugal rule: 10% of your income

For many people, I think that will be between 10–15% of their income. So if you earn $25,000 a year, that's going to be a high-mileage used car for $2,500–$3,000. If you earn $80,000, that's a used car for around **$10,000 or $12,000**.

Experts recommend that you spend **$5,000 to $10,000** on your first car. But honestly, it all comes down to what you can afford.

The result is that **the car will be a lot more expensive in the end**. In the example we've given, a car payment of $400 per month for five years (60 months) equates to $24,000. But the same $400 per month spread out over six years (72 months) is $28,800, while it's $33,600 over seven years (84 months).

Experts say **your total car expenses, including monthly payments, insurance, gas and maintenance, should be about 20 percent of your take-home monthly pay**. For non-math wizards, like me – Let's say your monthly paycheck is $4,000. Then a safe estimate for car expenses is $800 per month.

“**It's the single worst financial decision millennials will ever make**.” That's because the moment you drive it off the lot, the vehicle starts to depreciate: Your car's value typically decreases 20 to 30 percent by the end of the first year and, in five years, it can lose 60 percent or more of its initial value.

**Stretching your loan term to seven or even 10 years is probably too long for an auto loan because of the interest charges that stack up with a higher interest rate**. To illustrate, say you take on a $10,000 car loan for seven years with a 13% interest rate (a common rate for bad credit borrowers).

Financial experts say **your car-related expenses shouldn't exceed 20% of your monthly take-home pay**. So, let's say you bring home about $2,500 each month. The total amount you should spend on your car — including loan payment, gas, insurance and maintenance — is right around $500.

Average monthly car payment

By the beginning of 2022, the U.S. saw the nationwide average car payment reach **$648** for new vehicles. This was a 12.31% increase from the previous year — and it will likely continue to inflate further due to rising average car prices and the overall rise of inflation.

Most professional mechanics will tell you that **12,000 miles per year** is an accurate estimate for a car that has not been overdriven and considered to have high mileage.

Standard cars in this day and age are expected to keep running up to 200,000 miles, while **cars with electric engines are expected to last for up to 300,000 miles**. Keeping a car that long has a lot of benefits, including the fact that it could save you a great deal of money.

Typically, putting 12,000 to 15,000 miles on your car per year is viewed as “average.” A car that is driven more than that is considered high-mileage. **With proper maintenance, cars can have a life expectancy of about 200,000 miles**.