How much car can I afford?

Common rule: car payment + insurance + fuel + maintenance ≤ 10-15% of take-home pay. A tighter rule: price ≤ 35% of gross income. For a $60,000 earner, that's a $21,000 car max. Use our car-affordability-calculator for your specific numbers.

What's a good interest rate on a car loan?

As of 2026: new car loans run 5.5-7% for excellent credit, 9-13% for fair credit, 15%+ for subprime. Used car rates are typically 1-2% higher. Dealer financing is often higher than credit union financing — shop both.

Should I choose a 60-month or 84-month loan?

60 months max, ideally less. 84-month loans keep payments low but extend you underwater (owing more than the car is worth) for 4+ years. If you can't afford the 60-month payment, you can't afford the car.

Is a car payment a bad financial move?

Not necessarily — but most Americans finance too much car. A $500 monthly car payment over 20 working years, invested at 8%, would be $275,000+ in retirement. The financial cost of car payments is massive. Buying used and financing shorter helps.

Automotive · Free tool

Car Payment Calculator

Monthly loan payment with sales tax, trade-in, and down payment. Includes total interest + amortization.

Updated June 2026

Vehicle price ($)Down payment ($)Trade-in value ($)Sales tax (%)Loan rate (% APR)Term (months)

Monthly payment

$602.74

Loan amount: $30,080 (incl. $2,080 tax)

Total paid

$36,164

Total interest

$6,084

Amortization summary

Payment	Interest	Principal	Total
First payment (mo 1)	$188.00	$414.74	$602.74
Last payment (mo 60)	$3.74	$599.00	$602.74

Early payments are mostly interest; late payments are mostly principal — that’s why paying extra early saves so much.

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What it does

Calculate the actual monthly cost of a car loan and total interest paid over the loan term before signing at the dealer. Tool runs full amortization showing how payments shift from interest to principal over time. On a 60-month $30,000 loan at 7%, monthly P&I is $594; total interest paid is $5,640. Stretching to 84 months drops monthly to $452 but total interest jumps to $7,968 — and you’re underwater (owing more than the car’s value) for years longer.

Current car-loan rate landscape (2025-2026): excellent credit (760+) gets 5.5-7% new, 6-8% used. Fair credit (650-720) sees 9-13%. Subprime (under 650) faces 15-20%+ with limited approvals. Dealer financing is typically 1-2% higher than credit-union financing. Always shop pre-approval at your bank or a credit union (PenFed, Navy Federal, local CU) before negotiating with a dealer. Walk in with a pre-approval letter and tell the dealer to beat it — most will, or admit they can’t.

The biggest financial mistake car buyers make: stretching the loan term to make the payment fit a target monthly budget. If a 60-month payment is too high but 84 months works, you can’t actually afford the car. The 60-month maximum is a financial safety rule. Other smart-buying patterns: 20% minimum down payment (less and you’re instantly underwater); avoid add-ons (extended warranty, gap insurance, paint protection are all overpriced; buy gap insurance separately for $100-200 if you need it); negotiate price separately from financing terms.

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Example input & output

Input

Car price: $32,000 · Down payment: $4,000 · Trade-in: $0
Sales tax: 6.5% · APR: 7.5% · Term: 60 months

Output

Amount financed: $30,080 (price + $2,080 tax − $4,000 down)
Monthly payment: $602.74
Total interest: ≈ $6,084 · Total paid: ≈ $36,164

Sales tax is financed too in most states — it added $2,080 to the loan here. Shortening to 48 months raises the payment to ≈ $727 but cuts total interest to ≈ $4,830.

How to use it

Enter the negotiated car price (out-the-door, including doc fee but not tax/registration if separate).
Enter down payment (target 20%+ to avoid negative equity).
Enter trade-in value if applicable.
Enter loan term — 60 months max recommended; 36 or 48 even better for total interest.
Enter interest rate (use your pre-approval rate; if comparing dealer financing, run both).
Read monthly P&I, total interest paid, total cost. Test sensitivity: bumping rate from 6% to 9% adds ~$100-200 to monthly payment on typical loans.

How it works

The amount financed is price + sales tax − down payment − trade-in; tax is computed on the price (some states tax the price minus trade-in — check yours). The payment uses the standard amortization formula PMT = L × r ÷ (1 − (1 + r)⁻ⁿ) with r the monthly rate and n the term in months. The tool also shows the first and last payment’s interest/principal split — early payments are interest-heavy, which is why early payoff saves real money.

Common mistakes when using this tool

Negotiating the payment instead of the price. Dealers can hit any monthly number by stretching the term. Negotiate the out-the-door price; let the payment fall out of the math.
Forgetting tax and fees in the loan. A “$32,000 car” with financed tax, title, and doc fees is a $34,000+ loan. Enter the all-in numbers.
Ignoring negative equity risk. Long terms with small down payments leave you owing more than the car is worth for years — a totaled or traded car then means writing a check to close the gap.

When to use this tool

Pre-dealer negotiation — knowing the math gives you leverage to walk if dealer financing is bad.
Comparing financing options — dealer rate vs credit-union pre-approval vs cash purchase.
Comparing different cars — TCO over loan term varies more than sticker price suggests.
Lease vs buy decision — running buy scenario at same monthly payment shows what car you could own at lease cost.

When not to use it

Cash purchases — no financing, no interest; just pick a price you can comfortably pay.
Sub-12-month bridge loans — those have very different fee structures (origination fees, balloon payments) not modeled by amortization calculators.
Lease analysis — lease payments use different math (residual value, money factor) than loans; use a lease calculator instead.
Buy-here-pay-here / subprime financing — predatory practices not modeled by standard rates; high APR may be hidden in inflated price.

Common use cases

Buyer comparing 60-month vs 72-month financing on the same car.
Pre-approval shopping — comparing 3 lender quotes before walking into a dealership.
Monthly-budget reverse calculation — knowing target $400/month, calculating what loan amount is feasible.
Refinance analysis — current loan vs refinance offer with different term/rate.

Frequently asked questions

How much car can I afford?: Common rule: car payment + insurance + fuel + maintenance ≤ 10-15% of take-home pay. A tighter rule: price ≤ 35% of gross income. For a $60,000 earner, that's a $21,000 car max. Use our car-affordability-calculator for your specific numbers.
What's a good interest rate on a car loan?: As of 2026: new car loans run 5.5-7% for excellent credit, 9-13% for fair credit, 15%+ for subprime. Used car rates are typically 1-2% higher. Dealer financing is often higher than credit union financing — shop both.
Should I choose a 60-month or 84-month loan?: 60 months max, ideally less. 84-month loans keep payments low but extend you underwater (owing more than the car is worth) for 4+ years. If you can't afford the 60-month payment, you can't afford the car.
Is a car payment a bad financial move?: Not necessarily — but most Americans finance too much car. A $500 monthly car payment over 20 working years, invested at 8%, would be $275,000+ in retirement. The financial cost of car payments is massive. Buying used and financing shorter helps.

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