If you're buying a car and are looking at an auto loan payment of $750 a month, it doesn't necessarily mean you're purchasing a luxury vehicle. The average monthly payment for new vehicles hit a record high of $730 during the first quarter of 2023, according to Edmunds.
According to Experian's third-quarter automotive finance report, drivers are spending over $700 and $500 each month for new and used vehicles, respectively.
In general, it's recommended to spend no more than 10% to 15% of your monthly take-home income on your car payment, and no more than 20% on your total vehicle expenses, including insurance and registration. Read on to learn how you can determine how much car you can afford based on your financial situation.
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.
An affordable car payment would be one that doesn't exceed $600 a month, based on the rule of thumb that your car payment shouldn't be more than 15% of your take-home pay. If you take out a 60-month car loan at 8% APR, you should aim to take out a car loan of less than $30,000.
Ideally, you don't want to spend a week or more of your pay each month on a car note. A good ballpark range is that you should aim to spend no more than 15% to 20% of your income on all transportation costs — and that includes insurance, parking, maintenance, gas to put in the tank, and monthly payments.
The average monthly car payment is now a record $733, according to Edmunds. And even if your monthly auto loan payments are around $500 per month, that still may be uncomfortably high. And that's before adding up the cost of maintenance, fuel, and auto insurance.
Visit your My NerdWallet Settings page to see all the writers you're following. The average monthly car loan payment in the U.S. is $726 for new vehicles and $533 for used ones originated in the third quarter of 2023, according to credit reporting agency Experian.
If you have been qualified for a $30,000 car loan, the monthly payment depends on the amount of the down payment, interest rate, and loan length. For example, with a down payment of $2,500, an interest rate of 5%, and a loan length of three years, you will have to pay $824.20/month.
How much would a $30,000 car cost per month? This all depends on the sales tax, the down payment, the interest rate and the length of the loan. But just as a ballpark estimate, assuming $3,000 down, an interest rate of 5.8% and a 60-month loan, the monthly payment would be about $520.
Top 5 Car Prices for a $600 Payment
A $39219 car is $600 per month at 7.42% APR for 7 Years. A $34780 car is $600 per month at 7.42% APR for 6 Years. A $30000 car is $600 per month at 7.42% APR for 5 Years. A $24853 car is $600 per month at 7.42% APR for 4 Years.
Financial experts recommend that your monthly payment should be around 10% to 15% of your monthly take-home pay. Additionally, your total monthly car expenses should be no more than 20% of your monthly income, and this includes your car payment, insurance, maintenance and gas.
For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.
Financial experts answer this question by using a simple rule of thumb: Car buyers should spend no more than 10% of their take-home pay on a car loan payment and no more than 20% for total car expenses, which also includes things like gas, insurance, repairs and maintenance.
Financial experts recommend spending no more than about 10% to 15% of your monthly take-home pay on an auto loan payment. These percentages do not factor in total car expenses, including gas, insurance, repairs and maintenance costs.
If buyers don't have a downpayment or a trade vehicle, then the best way to get to a $300 car payment is to shop for a vehicle around $15,000. A $15,000 car has a monthly payment of $300 for 5 years at a 7.5% interest rate.
Example 2: A $25,000.00 secured personal loan financed for 60 months at an interest rate of 8.500% would yield an APR* (Annual Percentage Rate) of 8.496% and 59 monthly payments of $512.87 and 1 final payment of $513.24.
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.
Based on my complete answers published elsewhere, you should spend no more than 10% of your gross income or 15% of your net income on cars.
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Given what the typical driver is spending to own a vehicle today, a $250 monthly car payment really isn't so bad. But if it's a new payment for you, then it's important to take these steps to help ensure you're able to keep up.
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