Find Your Perfect Car Budget: Splurge Or Save On Your Ride?

When it’s time to buy a car, you’ll probably want to know: “How much car can I afford?” Financial experts answer this question by using a simple rule of thumb: Car buyers should spend no more than 10% of their take-home pay on a car loan payment and no more than 20% for total car expenses, which also includes things like gas, insurance, repairs and maintenance.
Here are three key steps to follow:
1. Calculate the car payment you can afford
You may wonder, “How much car can I afford based on salary?” Instead, you’ll want to base it off your take-home pay - the amount you make each month after taxes - to get a more accurate picture of your finances. NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment.
2. Calculate the car loan amount you can afford
Now that you’ve calculated your affordable monthly car payment amount, you can get a sense of how much you can borrow. This will depend on several other factors, including:
• Your credit score, which will in part determine your annual percentage rate, or APR, on the loan.
Your loan term, or the number of months you have to pay off the loan.
• Whether you buy new or used. New car loans tend to have lower APRs.
• With a monthly payment, an estimated APR and loan term, the car affordability calculator works backward to determine the total loan amount you can afford.
3. Set a target purchase price
The total loan amount you can afford isn’t necessarily the price of the car you can afford. If you’re making a down payment or trading in your old car, you’ll be able to buy a higher-priced car, or borrow less money.
To get a more precise estimate, here’s a breakdown of the typical extra costs:
• Sales tax: Typically 5% to 10%, and may include state, county and local taxes.
• Registration fees: Estimate these fees by using your state’s department of motor vehicles site.
• Documentation fee: Typically ranges from $75 to $895, depending on your state.
Once you have your target purchase price, you can use an online car-shopping site to find different models listed by price.
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[@dondenis1500]

Pay Cash!!!!!!!!!!!!!!! for a car.

[@richardweyland116]

The problem is all of the scumbag dealerships. I had to look nationwide before I found a decent dealer who actually wants to sell cars and not screw the customer.

[@mrjim1973]

Can I afford it? NOPE! Blessed with a very nice, rust free, low mileage 2013 F-150 that I bought new in 2013 for 27k, Title in hand. Would I buy another new F-150 at today's prices, NOPE! Ford has lost me! I won't work for them again either as I am a former Factory Certified Technician.

[@avgFloridian]

Most finance nerds recommend not spending more than 8% of your take-home pay. If you make $50,000 a year ($4,167 a month) then that comes out to $4,000 a year ($333.33 a month) that you can spend on a car. If you got a base model Nissan Versa with no options and a 72 month loan, then that's about the only way you can responsibly buy a new car (assuming the rest of your financials are in order). A lot of people I know don't make that much, and a lot of people I do know aren't driving around in a base model Versa. New cars are not affordable for most people. There are a lot of used cars which are also not affordable. Spending more than you should makes car, insurance, and lending companies tons of money while keeping you poor. If everyone starts buying responsibly, the big money companies will lobby to get government regulations loosened which will help drive down the cost of new cars, so that maybe one day more people will be able to afford new(er) cars responsibly.

[@jrs9264]

It helps Lauren if the dealer includes a huge bucket of chicken wings in the deal.....🤨🤯😇🐓🤣

[@vinniecorleone62]

I just got a great deal on a loaded 2022 Nissan Maxima with 34K miles on it, for 28K from a Nissan dealership. I have a 833 credit score, but even though my 2021 Ram Limited has a 2.26% rate, the best rate I could get with 50% down was 6.89%.

[@seymorefact4333]

If you want to be very comfortable and retire in early 50s! DON'T BUY A NEW CAR! NEVER BUY A NEW CAR! DON'T buy GM FORD JAGUAR FIAT BMW VW! you're be working till 90 for your car!

[@gtech66]

Only an idiot would buy a brand new car that loses thousands as soon as you drive it off the lot. Find the same car a year or two older, save thousands and get an extended warranty for the vehicle. You will be set for years.

[@mrjim1973]

Amen