How Much Car Can I Afford?
Updated June 2026 · 6 min read · Free calculator inside
A car is one of the biggest purchases most people make, and the sticker price is only part of the story. Working out what you can really afford means looking at the down payment, the loan, and the running costs together. Here is a simple framework.
Estimate your monthly car payment
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Open the Auto Loan Calculator →The 20/4/10 rule
- Put at least 20% down.
- Finance for no more than 4 years (48 months).
- Keep total car costs (payment + insurance) under 10% of your gross income.
Look at total cost of ownership
The monthly loan payment is just the start. Insurance, fuel, maintenance, tax and depreciation can add as much again. A cheaper car with lower running costs often beats a pricier one that strains your budget every month.
Why long loan terms are a trap
Stretching a loan to 72 or 84 months lowers the monthly payment but means far more interest and years of "negative equity", where you owe more than the car is worth. Keeping the term to 48–60 months protects your finances.
Down payment matters
A bigger down payment lowers your monthly payment and total interest, reduces the risk of going underwater, and can unlock a better rate. Aim for 20% on a new car, or 10% on a used one as a minimum.
Frequently Asked Questions
What car payment can I afford on $60,000 a year?
Using the 10% guideline, total car costs (payment plus insurance) of around $500 a month is a reasonable ceiling on a $60,000 salary — so a loan payment of roughly $350–$400 a month.
How much should I spend on a car?
A common rule is to keep the total price under about half your annual income, with the loan kept short and the running costs comfortably within your monthly budget.
Is it better to buy new or used?
Used cars avoid the steepest depreciation, which happens in the first few years, so they often offer better value — but newer cars may have lower maintenance costs and better finance rates.
Estimate your monthly car payment
Skip the maths — get an instant, up-to-date figure with our free calculator.
Open the Auto Loan Calculator →Related Guides
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⚠️ Disclaimer: This guide is for general information only and does not constitute financial, tax, or legal advice. Rates and thresholds can change — always check the latest figures on GOV.UK and consult a qualified professional before making decisions.