After you input your income, interest rate, and downpayment, the calculator will tell you the max purchase price of a car according to 3 popular car buying rules.
Rule 1: 20/4/10
- You can put 20% of the purchase price as a downpayment.
- You finance the car for no more than 4 years.
- Your monthly expenses for the vehicle - including loan payment, insurance, gas, maintenance, registration, and annual emissions check) are less than 10% of your gross monthly income.
Rule 2: 1/10th Guideline
Your car should be no more than 10% of your gross annual salary.
Rule 3: Dave Ramsey's Guideline
The total of all your cars should not be worth no more than half your annual income.
The article below gives a full breakdown of these car buying rules:
How Much Car Can I Actually Afford?
Buying a car will be one of the biggest financial purchases of your life. Because of the important nature of this decision, guidelines have been made for determining how much car you can afford based on your income, monthly expenses, and current debt.
Benjamin Carlson