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The first step to knowing how much car you can afford is determining the monthly payment amount that won't stretch your budget. With that information, you can use our car affordability calculator to set a realistic ceiling for your car price and loan amount.
Unlike auto loan calculators that start with total loan amount, NerdWallet’s car affordability calculator starts with the monthly payment you choose. It then shows you what loan amount you can afford, and how that amount is affected by different APRs and loan terms.
How to use the car affordability calculator
1. Input a monthly payment amount
A good rule of thumb is to keep your car payment under 10% of your monthly take-home pay, if possible, to ensure you have enough left for other expenses. Take-home pay is the amount you make each month after taxes, so if you bring home $3,000 monthly after taxes are deducted, it's likely you can comfortably afford a $300 car payment. Also, strive for no more than 20% of your take-home pay for total car costs — including loan payments, insurance, fuel, maintenance and annual vehicle registration.
2. Select your credit tier
Choose the credit tier you fall into, and the affordability calculator will automatically show an estimated Annual Percentage Rate (APR). This is an average estimate as provided by Experian Information Solutions, so your actual APR will differ. Still, it will give you an idea of the average interest rate for people in your credit tier. (You can check your credit score for free, if you don’t already know it.) Also, make sure to select whether you want to buy a "new" or "used" car, since that affects the interest rate.
3. Try various loan lengths
The auto loan term is the amount of time you have to pay back the loan. It's good to aim for a loan term of 60 months or less for new cars and 36 months or less for used cars, although that may not always be possible with today's high car prices. You can use the car affordability calculator to see how a longer loan term reduces the monthly payment but results in higher interest costs and the risk of owing more than the car's value.
🤓 Nerdy Tip
To test whether you can really afford a car payment, deposit the payment amount into a savings account for a few months. Take note of what you’re giving up to do so, and determine if it works for your budget. If so, the amount you save can be used for a down payment on a car.
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Set a target car price
Even after you use the car affordability calculator to see what monthly payment and car price you can afford, you can include other factors in your estimate for a realistic target price. For example, if the calculator says the payment you've input will enable you to finance $25,000, that doesn't account for any down payment, trade-in amount, sales tax or fees.
Down payment
Any money you're able to put down up front will reduce the amount you need to finance and lower the payment amount. In general, it's a good idea to make a down payment of at least 20% of a new car’s purchase price. For used cars, try for at least 10% down. Otherwise, put down as much as you can without draining your savings account.
Trade-in value
If you plan to trade in a car, figure out how much it's worth and subtract it's value from the new car's purchase price, again reducing the amount you will need to finance.
Sales tax and fees
When buying a car, you will pay certain taxes and fees, which vary based on the car and where you live. These can include the following:
- Sales tax: Typically 5% to 10% and may include state, county and local taxes.
- Registration fees: Varies and can usually be found on your state’s department of motor vehicles site.
- Documentation fee: Charged by the dealership to cover the expense of handling paperwork. Typically ranges from about $75 to $900.
A simple way to estimate these extra expenses is to add 10% to the advertised price of the car (even though you might negotiate a lower price). For example, if you see a car advertised for $40,000, assume your total cost — the out the door price — will be $44,000.
If you want to see how down payment, trade-in amount, sales tax or fees will affect your overall loan amount and car payment affordability, you can use our main auto loan calculator below to do that.
Loan details
2026
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Your loan estimate
Monthly payment
$368.47
Loan amount
$16,000.00
Total interest cost
$1,686.50
Total loan payments
$17,686.50
Payoff date
02 / 2030
Show amortization schedule
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