A car's monthly cost should ideally be under 10-15% of your take-home pay for the payment alone, with total costs (payment, gas, insurance, maintenance) staying under 20%, according to financial experts like NerdWallet and Bankrate. For context, 2025 averages were around $749 for new car payments and $965 for total ownership, but your budget depends heavily on your income, loan terms, and vehicle.
Between upfront costs for insurance, gas and maintenance, the average cost of owning a car is $12,297 a year or about $1,025 a month. For car shoppers, calculating the total cost of ownership empowers you to make smarter decisions. This includes budgeting for unexpected repairs with an emergency car fund.
As a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if you make the U.S. median annual income of $62,1920 after taxes, you could shop for a car that costs up to $606 per month.
Monthly Payment: When deciding how much car you can afford, you'll want to consider your take-home pay—which is the amount you make each month after taxes and other payroll deductions. Ideally, your monthly car payment shouldn't be more than 10% to 15% of your take-home pay.
While financial planners often suggest spending no more than 10% of your monthly take-home pay on your car payment—and keeping related expenses including gas, insurance, and maintenance under 15% to 20% of your budget—this guideline can feel restrictive given high vehicle prices in the current market.
Leasing a car is much cheaper than buying it outright, because you're only paying a percentage of the total price. You won't have to worry about fetching a good price or finding a buyer for it when you're done, as the dealership will take it back from you.
Beyond the monthly payment, you'll also face years of variable expenses like car insurance, gas, maintenance and taxes, which can spike without warning. By considering these costs before buying a new or used car, you'll be better prepared for the financial ups and downs of hidden car ownership costs.
You can find new cars for around $300/month, often through leasing deals on models like the Nissan Versa, Hyundai Kona, Honda HR-V, or Toyota Corolla Cross, but these usually require significant down payments, while used cars (like Kia Forte, Chevy Malibu, Nissan Rogue, Toyota Camry) can be financed closer to that price point without large upfront costs, depending heavily on your credit, location, and current offers.
In fact, for most people, the actual total cost of car ownership is $10,800-12,000 per year. The true cost of owning a car includes depreciation, loan interest, fuel, insurance, and maintenance costs, among other factors.
What is the best age for a used car to buy? If you want the best balance of cost and dependability, a used car that's 2-5 years old is usually your best bet. Here's why: A car loses most of its value in the first 2-3 years, so buying nearly new avoids the steepest depreciation.
Rates and terms are subject to change without notice. Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
The best times to buy a car are the end of the calendar year (Oct-Dec) for major discounts on outgoing models and meeting quotas, the end of the month/quarter for salespeople to hit targets, and January/February for lingering year-end deals and an influx of used lease returns, especially for EVs. Holiday weekends (Memorial Day, Labor Day, Black Friday) and slower days like rainy weekdays also offer opportunities for better deals.
Common Loan Lengths
Borrowing for a longer period usually means your monthly payments will be lower. However, you'll accumulate more interest over time. On the other hand, short-term loans have higher monthly payments, but you'll end up spending a lot less on interest.