Car Affordability Calculator

To use the car affordability calculator, you should input the following data for getting the most accurate results.

1. Monthly car payment: This should be the estimate amount that you can afford to pay for your loan on a monthly basis.
2. Loan term or Length of the loan: The period (in months) for which you want to take on the loan. The longer your term, the lower will be your monthly payment. However, you may pay a higher amount as interest charges for a long-term loan.
3. APR: Figure out an interest rate you are most comfortable with. Compare the different car payment amounts you may have to pay with different rates by inputting them into the auto loan rate calculator. Then calculate the respective APR.

APR = (Periodic Interest Rate * 365 Days) * 100

4. Sales tax: Most states in the United States impose sales tax on automobile purchases. Input the sales tax of the state where you wish to do the purchase.
5. Down payment: The amount paid initially when you buy a car with a car loan is referred to as the down payment. It is the amount you pay out of your savings or wages. The loan amount granted by your bank or non-banking financial company is the amount remaining after your down payment (NBFC).
6. Trade-in value: In exchange for your old car, a car dealer will offer you a trade-in value toward the purchase price of a new or used car. This is important if you seeking loan for an old car.

Once you have gathered the required information, all you got to do is enter them in the respective slots and you’ll get an immediate breakdown of how much you could possibly afford for your car.

Unfortunately, there is no exact formula for determining how much you can afford. But make sure that your new-car payment should be no more than 15% of your monthly take-home earnings.

It should not be more than 10% if you are leasing or purchasing a used car. It is smart to look for a vehicle with a payment of less than 10%-15% as you might know that the payment isn't the sum total of what you'll be spending.

You must consider the costs of fuel and insurance, which many individuals ignore. You must estimate that these charges will amount to an additional 7% of your take-home earnings. So, all total, you're looking at a budget that's no more than 20% of your monthly take-home pay.

While the 10%-15% rule may not be applicable to everyone, it is a solid starting point for determining a goal price that will not leave you rushing to pay your bills every month. In short you got to:

1. Be aware of your budget
2. Calculate your fuel and insurance expenses
3. Study your car purchasing habits

Based on your present wage, you can estimate how much automobile you can buy, but using your real take-home pay number will give you a more precise picture of how much you can actually spend. If you just have a rough idea of your annual earnings, use the table below to generate a ballpark figure for your monthly auto payment.