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Key monthly car payment statistics

The pandemic and resulting supply-chain issues, inflation, rising interest rates all play a part. Depending on whom you ask, the average car buyer in the U.S. is paying **$657 (Edmunds.com) or $712 (Moody's) a month** for their new vehicles.

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.

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**.

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.

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 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.

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**.

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**.

To find out how much car you can afford with this 36% rule, simply multiply your family's income by 0.36. So if you earn $100,000, for example, you could afford to take out a car loan of **up to $36,000** — assuming you don't have any other debt.

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.

Most lenders say a DTI of 36% is acceptable, but they want to loan you money so they're willing to cut some slack. Many financial advisors say a DTI **higher than 35%** means you are carrying too much debt. Others stretch the boundaries to the 36%-49% mark.

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.

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.

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.

The result is that **the car will be a lot more expensive in the end**. In the example we've given, a car payment of $400 per month for five years (60 months) equates to $24,000. But the same $400 per month spread out over six years (72 months) is $28,800, while it's $33,600 over seven years (84 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).

**Financing a car may be a good idea when:** **You want to drive a newer car** you'd be unable to save up enough cash for in a reasonable amount of time. The interest rate is low, so the extra costs won't add much to the overall cost of the vehicle. The regular payments won't add stress to your current or upcoming budget.

Brian Moody, executive editor for Kelley Blue Book, told ABC News that **a low supply of cars and high demand from buyers** means consumers "are going to be paying more" than the MSRP.

Experts recommend that you spend **$5,000 to $10,000** on your first car. But honestly, it all comes down to what you can afford. Here are a few simple tips to help you calculate a figure that would work well for you: Don't spend more than 15% of your gross pay or 20% of your take-home pay.

“**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.

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

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**.