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For instance, using our loan calculator, if you buy a $20,000 vehicle at 5% APR for 60 months the **monthly payment would be $377.42** and you would pay $2,645.48 in interest.

This means that if you can afford a $20,000 car loan, again, assuming no down payment or trade-in credit, you'll want to shop for a car with a sticker price of **around $18,000** so that you'll be able to cover sales tax and fees with your total loan amount.

Your new loan amount would be $25,000, your monthly payment would be **$452**, and you'd pay $2,113 in total interest charges.

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%.

- 2022 Honda Civic. Payment: $280 / month Lease Term: 36 months MSRP: $23,645. ...
- 2023 Kia Seltos. ...
- 2022 Honda HR-V. ...
- 2022 Toyota C-HR. ...
- 2022 Mazda Mazda3. ...
- 2022 Mitsubishi Mirage. ...
- 2022 Toyota Corolla Cross. ...
- 2022 Toyota Corolla Hybrid.

To cut to the chase, it's smart to spend **less than 10% of your monthly take-home pay** on your car payment, so you can keep your total car costs below 15% to 20% of your income.

Because of the high interest rates and risk of going upside down, **most experts agree that a 72-month loan isn't an ideal choice**. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.

The average monthly car payment for **new cars is $648**. The average monthly car payment for used cars is $503.

Because $20,000 is relatively inexpensive for a new car (most new cars are around $40,000), **you position yourself even better for approval**. So make sure to shop around and find a lender willing to work with you. Keep in mind that you'll also need to budget for full coverage car insurance.

How much should you spend on a car? If you're taking out a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. **If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600**.

A down payment **between 10 to 20 percent of the vehicle price** is the general recommendation. But if you can afford a larger down payment, you can save even more money on interest payments over the life of the loan. By dropping the amount financed, you save some even before you start negotiating the car price.

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.

For most borrowers, an 84-month auto loan may not be the best idea due to high interest rates, increased risk and vehicle depreciation. However, **an 84-month auto loan can be a good idea for borrowers who need lower monthly payments**.

The lowest amount you can finance a car for may be **$5,000 if you have bad credit**, but there are ways you can make the overall cost of any loan more affordable. It may take some time and planning, but it's worth it if you want to finance the lowest amount possible.

Using Experian's most recent report, The Zebra found that for Q1 2022: New car payments averaged **$648**, a 12.31% year-over-year increase, due to average new car loans rising 11.74% to $39,540. The average loan interest rate for a new car was 4.07%, and the average term length was 69.48 months.

**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).

A $30,000 car, roughly **$600 a month**.

**The most common term currently is for 72 months**, with an 84-month loan not too far behind. In fact, over 73% of new car loans in the first quarter of 2022 were longer than 60 months — an increase of about 33 percentage points since 2010.

(1) **You will generally pay less interest on a 36 or 48 month loan than you would on a 60** (assuming that we are not talking about 0% interest deals here). So, while your payments will be higher the shorter the term, your total interest paid will be lower.

For $40,000 loans, monthly payments averagely range **between $900 and $1,000**, depending on the interest rate and loan term.

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.

**Paying cash for your car may be your best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing**. However, keep in mind that while you do free up your monthly budget by eliminating a car payment, you may also have depleted your emergency savings to do so.

There's really only one benefit of a long-term auto loan that spans six to seven years or even longer. **The longer the car loan, the smaller the monthly payment**. By taking out financing with an extended loan term, you can potentially buy a more expensive car and still stay within your monthly budget.