According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.
The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533.
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 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.
Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.
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. Edmunds.
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.
How much car can I afford with a 70k salary? Based on the 20/4/20 rule, with an average interest rate, you can afford a $19,000-20,000 car on your $70k salary.
How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
To apply this rule of thumb, budget for the following: A 20% down payment. Repayment terms of four years or less. Spending less than 10% of your monthly income on transportation costs.
What is the 20/3/8 rule for financing a car? — The 20/3/8 rule suggests putting 20% down, financing for no more than 3 years, and ensuring that monthly payments do not exceed 8% of monthly gross income.
How much car can I afford if I make $50,000? While it depends on factors like your credit score, loan terms, down payment and any potential trade-in value, you may find that a vehicle in the $20,000 to $35,000 range will fit your budget.
According to Foster, rising interest rates make it more expensive to borrow money. And that, combined with high costs, has been like a one-two punch to Americans' finances. She explains that this has left many drivers “resigned to finance an exceptionally expensive big-ticket purchase at an uncomfortably high rate.”
However, it might be difficult to qualify for more than one, and having multiple car loans outstanding might not make financial sense. In practice, few people have more than two auto loans at once.
However, in general, a salary of $70,000 a year can provide a comfortable lifestyle in many areas of the United States. This may include being able to afford a modest home or apartment, a reliable car, regular entertainment and dining out, as well as savings for retirement and emergencies.
Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.
While there is no set credit score to get an auto loan, a majority of approved borrowers have scores above 660. Having a low credit score won't necessarily keep you from getting an auto loan, but you will likely pay a higher interest rate.
Car prices were high in 2023, and financing rates were expensive. Buying a car in 2023 wasn't good for many people's personal finances.
In January 2024, automotive site Edmunds.com listed the average car loan interest rate for December 2023 as 7.1% APR for new car loans and 11.4% APR for used car loans. Data company Cox Automotive gave the volume-weighted average rate as 9.75% for new cars and 14.13% for used cars in its 1/23/24 Auto Market Report.
Generally speaking, cars purchased with a large down payment and with a short-term car loan are considered to be good debt. That's because large down payments usually mean lower interest rates. Further, a shorter loan term means you'll pay less in interest over the life of the loan.
That means you'll have to find a car that depreciates less than $3,600 over a three-year term, has a low interest rate in the lease terms (called the money factor in leasing), and has very low fees to create a lease with average payments of $100 per month.
$300 per month is not enough to own any car. The purchase itself would require months of savings, then insurance, fuel, tires, windshield wipers, brakes and maintenance would ultimately cost more than your income. Buy a bicycle or possibly a moped.
But according to Edmunds, there's another reason why $1,000 monthly payments are becoming more common: Some buyers are taking out loans with shorter-than-normal financing terms to score a better financing deal, which means higher monthly payments. Endurance offers extended protection for your vehicle.