How Much Car Can I Afford? Here’s How to Calculate and Save (2021)

Auto Dealership People are notorious for pushing people to buy more expensive vehicles, so it is important to understand how many cars you can buy before you start shopping. Consider both Total cost Borrow and own Monthly payment When deciding on the right car for you.

Insurance costs vary depending on the vehicle you choose, so it is a good idea to estimate those costs before purchasing a car. Generally, you should not spend more than 10 percent of your the wages On payment for your car. Here’s how it breaks down for a few different salaries:

Pre tax salary Monthly car payment
$ 30,000 $ 198
$ 50,000 $ 319
$ 75,000 $ 456
$ 100,000 $ 591

Keep in mind that these are general guidelines. Your the wages If you pay self-employment tax it may be lower, and state income tax may vary. You have to take your other financial obligations into consideration when evaluating and setting your budget Monthly payment you can afford.

This is a good way to find out what the best deal is Car insurance you’ll have to New car To use To stress. You will only need to answer some questions about the vehicle you are insuring and your driving history, and our artificial intelligence technology will give you multiple is cheap Car insurance Quotes from different providers, so you can compare them in one place. And because it is fast and easy, you can estimate the cost of insurance for the many vehicles you are considering.

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Why Car Affordability Calculator You won’t tell everything

If you are wondering how many cars you can buy based on your salary Car strength calculator Can be a good place to start. Car strength calculator Designed to show you what loan amount You can spend on a basis Monthly car payment That fits your monthly budget. But you still have to decide whether Monthly payment Should be While 10 percent of your after-tax income is generally a good maximum, you may not be able to afford whether you have a student loan or other loan to worry about.

other than this, Car strength calculator There is no factor in things like insurance, maintenance, and fuel costs, which can be pricier for some cars than others. Consider your other financial responsibilities and vehicle costs that you have in mind when deciding Monthly payment Works best for you.

7 easy steps to determine how many cars you can buy

1. Calculate how much your household earns.

First, add your income from various sources. These may include salaries for you and your spouse, income from the party, alimony, etc., calculating your tax burden and deducting that amount to determine your post-tax income. Huh.

2. Calculate the average expenses of your household.

To start making a budget for your car purchase, Find out how much your home spends each month on other necessities. First, add your fixed bills, such as your mortgage or rent payments, and health insurance premiums. Next, look at your past average expenses (A Of budget The app can help you determine how much income you will need for variable expenses such as groceries and personal care items).

Look to see if there are areas where you can trim your budget to make room for car payments. For example, if you are buying a cup of coffee each day, consider making it at home. It can free you more monthly income For the cost of car ownership.

You will also have to determine how much is left for your car payment, while determining what you will have to pay on other debt and savings goals.

3. Research car loan And determine your level of comfort with the loan.

First, determine what you can do based on the payments you make in savings and trade-ins. Price of your current vehicle, if applicable. If you plan to use a Credit Card For you advanced payment, You should also repay with interest in your budget. Next compare Rate of interest from different Lender. You can use a loan-comparison site to check your rates at multiple rates. Lender.

In addition to the interest rate, the loan term will also affect your monthly payment amount. Some lenders will give you the option of a seven-year loan, which may reduce your monthly payment. And you will get help in buying an expensive car. But experts usually warn against Loan terms More than five years. This is because you will pay more interest in the long run, especially if you have Bad credit. If you only have high qualifications Rate of interest On your basis credit score And choose an 84-month period, you can potentially end the payment Double the sticker price Of vehicle over the life of the loan.

4. New or Used? Give the pros and cons below.

When deciding between a used car and a new vehicle you should consider more than just the price range. There are pros and cons to each. For example, instant Depreciation Of New car It makes sense to purchase GAP insurance, which is an additional cost.

New cars In general, getting insurance can be even more expensive, although some security features may give you a discount. On the other hand, second hand car Quicker and more maintenance may be required, and some second hand car Are not covered by The warranty. Debt APRs are also generally higher second hand carEven if you have Outstanding credit. Till now used car Likely to cost Less money in totality.

The pros Opposition
New car
  • Best New Technology and Safety Features
  • The warranty Were involved
  • Rapid deterioration
  • too expensive
  • vehicle insurance Generally cost more
used car
  • Cost Less money in totality
  • Is usually cheaper to insure
  • May not be available for to lease
  • High apr on loan

5. Narrow the market and determine your top few pics.

Once you decide which features are important to you in your new car, you can start the car buying process by looking at the prices for different models on sites like Kelly Blue Book or Edmunds.

When searching for a car, keep the maximum sticker price below the set loan amount You have determined that you can afford. This is because you have to calculate it sales tax And other fees, which may add up to an additional thousand dollars or more.

6. Calculate maintenance costs for your top pick. (Do not do it Car insurance()

An easy way to calculate additional costs in excess of the sticker price for your car is to use the Edmunds True Cost to Own (TCO) tool.. Based on the make, model, and year of the car, this calculator will estimate costs over a five-year period for things like interest, Depreciation, Fuel costs, maintenance and insurance premiums.

However, keep in mind that this calculator will only give an estimate. You can get a better idea of ​​what your insurance premium will be if you use To stress To search for customized quotes. It is fast and easy, so you can pull quotes from many types of insurers for all the vehicles you are considering. To get started all you have to do is answer a few questions.

7. Determine and value a final sticker loan payment You are sure you can afford – and make sure to swing!

Once you have evaluated your budget and calculated the running cost and sales tax, You are ready to reduce the maximum sticker price. You can bring that number Dealership Or compare car prices online beforehand. Some online Car purchase The sites don’t leave room for conversation, but be sure to do the hag if you can.

Conclusion: Tips to save Car insurance Quotes

  • Improve your credit score. In most states, Car insurance Providers use your credit-based insurance score to determine your premium amount. If you take steps to pay off the loan and pay it on time, then you can take advantage of lower premiums.
  • Choose the right vehicle. Some cars are less expensive than others. Cars that are generally cheaper to insure include the Subaru Forester and Honda CR-V. View our list Car insurance By average premium.
  • Take a defensive driving course. Many insurance companies offer discounts to drivers who take defensive driving courses. Some of these can be taken online. It is worth spending a few hours to get a lower premium.
  • Pick your deductible. A higher deduction means that you share more of the financial responsibility for the accident with your insurer. This allows for a lower premium. Just make sure you have enough money emergency fund To cover the deductible amount you choose.
  • Reduce your coverage. If you have a loan or lease, you will usually need full coverage. But if you are buying something cheaper used car Outright, it can opt for a lower coverage amount and receive a lower premium.
  • Ask about discounts. You may be able to get cash back or rebate for installing telematics devices. Most insurance companies also offer discounts for this. home Ruler, Good students, safe drivers, and more.
  • Choose pay-per-mile insurance. If you drive repeatedly, you can get a lower rate by choosing an insurer that offers pay-per-mile insurance.
  • Compare car insurance quotes with Insurify. Each insurer weighs your personal information differently, so some providers will be able to offer you a lower premium than others. Instead of pulling quotes from personal insurers’ websites, protect yourself from trouble and use To stress Compare Car insurance Quotes from multiple providers in one place.

To stress

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FAQ: How much car can I buy?

How many cars can I get based on my income?

Generally, you should not spend more than 10 percent of your income on the payment of your car. But you have to take your other financial obligations into consideration when evaluating your budget and determining the monthly payment you will pay.

How much loan should I take to buy a car?

It is okay to take a loan to buy a car, but the larger your down payment, the less pressure you will have on your monthly budget. A good rule of thumb is to keep at least 20 percent for new cars and at least 10 percent for used cars. To determine how much loan you can take, you can find out the monthly payment you have to bear. Then, use the loan term and your estimated APR to calculate the maximum amount you have borrowed.

Who is the cheapest car insurance?

The cheapest car insurance for you will depend on many factors including your age and gender, your vehicle and driving history, and your credit score. Therefore it is important to compare customized quotes from different insurance companies. In the past, obtaining quotes from insurance companies was time consuming and often frustrating. But Insurify uses artificial intelligence techniques to pull quotes from multiple insurers at once. You can easily toggle between coverage amount and deductibles to find a policy that fits your budget.

Updated 27 January 2021

Lindsey Franklin is a Denver-based personal finance writer for Insurify. His work has been featured in publications such as LendingTree and FinanceBuzz. When she is not writing, you can enjoy her outdoors, play music, or listen to audiobooks with your rescue mannequin.