Score: 4.6/5 (5 votes)

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.

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.

Financial experts generally recommend capping auto payments and related expenses at **10%–15% of monthly income**. Beyond the sales price, buyers should also budget for other expenses like repairs, registration, and insurance.

With a $100,000 salary, you could afford a mortgage payment of **no more than $2,500**. For those with a salary near $30,000 your home, car, and debt combine should be no more than $1,250 per month.

Calculate the car payment you can afford

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.

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.

**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.

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**.

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**.

It doesn't matter so long as the car costs **10% of your annual gross income or less**. If you make the median per capita income of ~$42,000 a year, limit your vehicle purchase price to $4,200. If your family earns the median household income of $68,000 a year, then limit your car purchase price to $6,800.

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

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.

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.

According to the Bureau of Labor Statistics, a 60k annual income is the median US income. This means that half of all workers in the US make more than 60k per year, and half make less. However, **60k per year is generally considered to be a good salary**.

However, since cars are a depreciating asset, the less you pay for a car, the better. But based on the less-than-half-your-salary rule, to buy a Lamborghini (without all the bells and whistles) you need to be making… **$480,000 a year**. You can buy a Lamborghini earning less of course.

**The average new car payment in America has crept above the $500 per month mark for the fist time, settling in at $503**, according to a recent study by Experian. And if that weren't bad enough, the average length of a car loan now stands at 68 months.

Your monthly payments would look like this for a $40,000 loan: **36 months: $1,146**. 48 months: $885. 60 months: $737.

That's because, according to a study done by researchers at Experian Automotive (and published on Forbes), **61% of wealthy people actually drive Hondas and Toyotas** and Fords, just like all the rest of us.

While it's easy to think that millionaires all drive sports cars and live in huge mansions it's just not true. **81% of millionaires purchase their vehicle** and only 23.5 percent actually buy new cars.

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.

ADVANTAGES. **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.

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.