$70,000 income, $200 running costs, 7%, 48 months, 20% down
About $20,010 of car, with a $383 monthly payment.
Car affordability calculator
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Uses the 20/4/10 rule: put at least 20% down, borrow for no more than 4 years, and keep the loan payment plus insurance and fuel under 10% of gross monthly income. Sales tax, registration and trade-in value are not included.
70 thousand
%
Loan term
%
Car price you can afford
$20,010
10% of your monthly income is $583. After $200 of running costs that leaves $383 a month for the loan, enough to borrow $16,008 over 48 months with $4,002 down.
- Monthly loan payment
- $383
- Loan amount
- $16,008
- Down payment
- $4,002
- Total interest
- $2,392
Car price by loan term, same payment
| Term | Loan amount | Car price | Total interest |
|---|---|---|---|
| 36 months | $12,415 | $15,519 | $1,385 |
| 48 months | $16,008 | $20,010 | $2,392 |
| 60 months | $19,359 | $24,199 | $3,641 |
| 72 months | $22,484 | $28,105 | $5,116 |
A car budget that does not squeeze the rest of your life
Dealers like to talk about the monthly payment, because a low payment can hide a long loan and a high price. A better start is a ceiling based on income. The 20/4/10 rule is a popular one: 20% down, a loan of 4 years at most, and total car costs under 10% of gross monthly income.
On $70,000 a year, gross monthly income is $5,833, so 10% is $583. Take off $200 a month for insurance and fuel and $383 is left for the loan. At 7% over 48 months that repays $16,008. Add a 20% down payment and the car can cost about $20,010.
Look at the term table to see why the rule says 4 years. Stretching the same $383 over 72 months lets you buy a $28,105 car, but interest rises from $2,392 to $5,116, and for most of the loan you would owe more than the car is worth.
On $100,000 a year with $250 of running costs, the same rule allows about $30,450. Sales tax, registration and dealer fees come on top, so leave room for them, and remember that a used car with a shorter loan often stretches the budget furthest.
Sources
What this calculator does not account for
- Sales tax, registration and dealer fees are extra.
- The 20/4/10 rule is a cautious ceiling, not a law.
How this is calculated
Formula: 20/4/10 rule
loan payment =gross monthly income × 10% − insurance and fuel; car price =loan ÷ (1 − down payment share)What the symbols mean
- 20Put at least 20% down.
- 4Borrow for no more than 4 years.
- 10Keep all car costs under 10% of gross monthly income.
- loanThe amount the monthly payment can repay at your rate and term.
Good to know
- Longer loans raise the price you can borrow but add interest and leave you owing more than the car is worth for longer.
- For the payment on a car you have chosen, use the car loan calculator.
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Worked examples
Each example is worked out by the same code as the calculator above.
$100,000 income, $250 running costs, same loan
About $30,450 of car.
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<iframe src="/embed/car-affordability-calculator" title="Car affordability" width="100%" height="720" style="border:0;max-width:42rem" loading="lazy"></iframe>Questions
How much car can I afford on $70,000 a year?
By the 20/4/10 rule, about $20,000 with 20% down, a 4-year loan at 7% and $200 a month of insurance and fuel.
What is the 20/4/10 rule?
Put 20% down, borrow for at most 4 years, and keep the payment plus insurance and fuel under 10% of gross monthly income.
Is a 72-month car loan a bad idea?
It lowers the payment but costs more interest and leaves you owing more than the car is worth for years. The table shows the extra interest.
Should I include insurance in my car budget?
Yes. The rule counts insurance and fuel inside the 10%, because they are part of what the car costs you each month.
Is the rule too strict?
It is cautious on purpose. If you have no other debts and save well, you might stretch it a little, but it is a sensible ceiling for most budgets.