Work backwards from what you can pay each month to the sticker price you should be shopping for. Enter your income (or a monthly budget), the loan rate and term, your down payment and trade-in, and the calculator gives the maximum car price, the loan amount and interest, plus a check against the 20/4/10 rule.
You can afford a car priced up to
$29,066
$31,100 out the door with tax
Monthly payment
$625
48 months
Loan amount
$26,100
$3,900 interest over the term
Cash in
$5,000
down + trade-in
20/4/10 rule check
⚠️ 20 % down: you have $5,000, the rule wants $5,813
✅ 4-year term or shorter: 4 years
✅ Payment ≤ 10 % of gross income: $625 vs $625
📌 Loan amount = payment × (1 − (1 + r)⁻ⁿ) ÷ r. The 10 % budget leaves room for insurance, fuel and maintenance, which typically add $300–500 a month; the 15 % option assumes those are included in your figure. Rates depend on credit score and whether the car is new or used.
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Affordable car price by income (10 % rule, 4 years at 7 %, $5,000 down)
Annual income
Monthly payment
Loan
Car price (before tax)
$40,000
$333
$13,920
$17,682
$50,000
$417
$17,400
$20,935
$60,000
$500
$20,880
$24,187
$75,000
$625
$26,100
$29,066
$100,000
$833
$34,800
$37,196
$150,000
$1,250
$52,200
$53,458
Sales tax and fees assumed at 7 %. Insurance, fuel and maintenance come on top of the payment.
How the calculation works
The payment budget is turned into a loan amount with the standard annuity formula, then the down payment and trade-in are added to get the out-the-door price, and sales tax and fees are stripped out to give a comparable sticker price. Example: $75,000 income → $625 a month → $26,100 loan over 48 months at 7 % (interest $3,900) → with $5,000 down, $31,100 out the door → about $29,000 sticker before 7 % tax and fees.
A common guideline is a payment of no more than 10 % of gross monthly income, with all car costs (payment, insurance, fuel, maintenance) under 15–20 %. On $75,000 a year that is a $625 payment; over 4 years at 7 % it supports a $26,100 loan, and with $5,000 down a car priced around $29,000 before tax. Enter your own numbers above — the loan term and rate move the answer more than people expect.
Put at least 20 % down, finance for no more than 4 years, and keep total car expenses (payment plus insurance and fuel) under 10 % of gross income. It is deliberately conservative: it keeps you from being underwater on the loan as the car depreciates and limits interest paid. Many buyers relax it to 15 % or a 5-year term; the calculator shows which parts you meet.
Because the same monthly payment stretched over 72 or 84 months buys a bigger loan — but you pay far more interest and the car may be worth less than you owe for years. $625 a month at 7 % buys a $26,100 loan over 4 years, $31,600 over 5 and $36,700 over 6, while total interest climbs from $3,900 to $8,300. Choose the car by the 4-year payment even if you take a longer loan.
Yes — sales tax (0–10 % by state), title, registration and dealer documentation fees add 5–10 % to the sticker price and are usually rolled into the loan. The calculator converts the amount you can finance into a pre-tax sticker price using the rate you enter, so compare its result with advertised prices directly.
Through the interest rate. Top-tier borrowers see new-car rates around 5–6 %, average credit 8–10 %, and subprime 14 % or more; used-car rates run 2–4 points higher. At $625 a month over 4 years, moving from 7 % to 12 % cuts the affordable loan from $26,100 to $23,700 — the difference between two trim levels.