Car Affordability Calculator
How much car can you really afford? Calculate the maximum price based on your income, find the true annual cost of ownership, or compare new vs used over 5 years. Works with any currency.
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How to Use This Calculator
Tab "Max Price"
Enter your monthly gross income, monthly expenses, down payment, interest rate, and loan term. Choose between the conservative 15% rule or the aggressive 20% rule. The calculator shows the maximum car price you can afford, the maximum loan amount, and your ideal monthly payment.
Tab "Total Cost of Ownership"
Enter the purchase price and running costs: insurance, fuel, maintenance, depreciation rate, and registration fees. The result shows your true annual cost of owning the car, the monthly cost, and the cost per kilometre driven.
Tab "New vs Used"
Configure the new car price and its costs (loan rate, insurance, maintenance, depreciation), then set the used car discount and its costs. The calculator compares total costs over your chosen period (typically 5 years) and shows how much you save with each option.
The Formulas
Max Payment = Gross Monthly Income × 15% (conservative) or 20% (aggressive)
Also capped at 20% of take-home pay (Income − Expenses)
Maximum loan amount:
Max Loan = Payment × [(1 − (1 + r)^−n) / r]
where r = monthly rate, n = number of months
Maximum car price:
Max Price = Max Loan + Down Payment
Annual total cost of ownership:
Annual TCO = Depreciation + Insurance + Fuel + Maintenance + Registration
Depreciation = Purchase Price × Depreciation Rate
Cost per kilometre:
Cost per km = Annual TCO / Annual km driven
New vs Used comparison:
Total Cost = Loan Payments + Insurance + Maintenance (over comparison period)
Depreciation Loss = Price − Price × (1 − rate)^years
All calculations are universal and pre-tax. No country-specific tax rates, registration fees, or insurance data are applied. Results are estimates.
Worked Examples
Example 1 — $6,000/mo income, 15% rule, max car price
A person earning $6,000 per month gross wants to know the maximum car they can afford using the conservative 15% rule, with $5,000 down, 6.5% APR over 60 months.
With the 15% rule, a $6,000/mo earner can afford roughly a $50,800 car. The monthly payment of $900 leaves enough room for other financial goals.
Example 2 — $35,000 car total cost of ownership: $9,200/yr
Someone bought a $35,000 car and wants to know the true annual cost of ownership including all expenses.
Your $35,000 car actually costs over $10,000 per year to own. Depreciation alone accounts for half of that. Understanding TCO helps you make better buying decisions.
Example 3 — New $40K vs Used $24K: 5-year savings of ~$13K
Comparing a new car at $40,000 (5.5% APR, $2,000 insurance, $400 maintenance) against a 3-year-old used version at $26,000 (7.5% APR, $1,600 insurance, $1,200 maintenance) over 5 years.
Even with higher maintenance and a higher loan rate, buying used saves roughly $12,500 over 5 years. The lower purchase price more than offsets the additional running costs.
Understanding Car Affordability
The Income-Based Rules
Financial planners use two common rules for car affordability. The 15% rule says your monthly car payment should not exceed 15% of your gross monthly income — this is the conservative, recommended approach. The 20% rule is more aggressive and may leave less room for savings. Additionally, your total vehicle costs (payment, insurance, fuel) should stay under 20% of your take-home pay.
Why TCO Matters More Than Price
The sticker price is only part of the story. Depreciation is the single largest cost of car ownership, especially for new vehicles that lose 20-25% of their value in the first year. A car that costs $35,000 to buy can cost $9,000-$11,000 per year to actually own when you add insurance, fuel, maintenance, and registration.
New vs Used: The Real Math
A 3-year-old used car has already absorbed the steepest depreciation curve. You typically pay 30-40% less than new while getting a car with most of its useful life remaining. The trade-offs are higher loan rates (1-2% more), no factory warranty, and potentially higher maintenance. But in most scenarios, buying used saves $10,000-$15,000 over 5 years.
Down Payment Strategy
A larger down payment reduces your loan amount, monthly payment, and total interest paid. Aim for at least 10-20% down. This also helps avoid being “upside down” on your loan (owing more than the car is worth), which is especially important given how fast new cars depreciate.
Loan Term Considerations
Shorter loan terms (36-48 months) mean higher monthly payments but significantly less total interest. A 72-month loan may feel affordable monthly, but you pay thousands more in interest and risk being upside down for most of the loan. The sweet spot for most buyers is 48-60 months.