Car Affordability Calculator
Your income, your cash, and what the car really runs
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Planning estimate only. Enter complete, current figures and keep an appropriate buffer for irregular or unexpected expenses.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter your GROSS monthly income — before tax, not what lands in the account. The rule is written against pre-tax income deliberately.
- 02
Enter the cash and trade-in equity you can put down, your other monthly debt payments, and the auto loan rate you expect. Experian's Q1 2026 new-car average was 6.39%, but your credit band moves it by more than eleven points.
- 03
Fill in insurance, fuel and maintenance a month. This is the step people skip and it is the one that matters: the 10 in 20/4/10 covers those three PLUS the payment, so leaving them blank sends the whole budget to the payment and overstates the price.
- 04
Add sales tax and the title, registration and documentation fees, which come out of your cash before any of it reaches the down payment.
- 05
Read the price the rule supports, then the price a lender would approve beside it, then the term table showing what stretching from 48 to 84 months buys and what it costs in interest.
Formula
The rule: budget = gross monthly income × 10%. Payment available = budget − (insurance + fuel + maintenance). Loan supported = the present value of that payment at your rate over 48 months. Price = (loan + cash after fees) ÷ (1 + sales tax), capped separately by the down payment test, price ≤ cash after fees ÷ 20%. The lender's side: payment-to-income allows gross × 20% − insurance; debt-to-income allows gross × 45% − your other debt payments; the lender's payment is the smaller of the two, and the price it buys uses the market's 69-month term rather than the rule's 48.
Example
$7,500 gross a month, $8,400 of cash and trade-in, $2,100 of other debt payments, a 6.39% rate, and AAA's averages of $141 insurance, $163 fuel and $138 maintenance a month. The 10% budget is $750; running costs take $442 of it, 59% of the whole budget before a dollar reaches the loan, leaving $308 a month for the payment. Over 48 months that supports a $13,015 loan and, after $813 of fees and 6.5% sales tax, a car of $19,345 with $3,869 down. Now the lender: 20% payment-to-income would allow $1,359 a month, but 45% debt-to-income against $2,100 of existing payments allows only $1,275 — so the lender's ceiling is $1,275, which over 69 months buys $76,102 of car. That is $56,757 more than the rule supports, and at that payment your all-in transport cost would be 22.9% of gross instead of 10%.
Definitions
- 20/4/10 rule
- Advisory convention — 20% down, four-year maximum term, and all transport costs inside 10% of gross monthly income. Stated consistently by Chase, J.D. Power, LendingTree and others; no agency promulgates it.
- Payment-to-income (PTI)
- The lender's ratio of the car payment plus insurance to gross monthly income. Typically capped at 15-20%, and a narrower basket than the rule's 10% against a much higher ceiling.
- Debt-to-income (DTI)
- Total monthly debt payments as a share of gross income. Subprime auto lenders typically stop at 45-50%; under 43% is a common preference and under 36% is considered excellent.
- Amount financed
- The price plus sales tax and fees, less your cash and trade-in. It is what the payment is calculated on, and it is usually larger than the sticker price people quote.
- Doc fee
- The dealer's documentation charge, added at signing along with title and registration. It comes out of your cash before any of it counts toward the down payment.
Good to know
Three numbers, and the job each one is doing
20/4/10 is advisory convention rather than law or underwriting. It is stated consistently by Chase, J.D. Power, LendingTree, Capital One and CNBC, and no agency or standards body promulgates it — which distinguishes it sharply from the mortgage world's 28/36, a pair of ratios lenders genuinely apply. That does not make it arbitrary, because each of the three terms is solving a specific problem. The 20 exists to outrun the first year of depreciation, so that the loan balance never sits above what the car would fetch. The 4 forces the amortization schedule to fall faster than the value curve and keeps the loan shorter than the period in which the car needs no significant repairs — nobody wants to be paying for a car and rebuilding it in the same month. The 10 is the term almost everyone misreads. It is not ten percent of gross income for a car payment; it is ten percent for the payment plus insurance plus fuel plus maintenance together. That is an unusual thing for a budgeting rule to do: it caps the activity rather than the asset. At $7,500 of gross monthly income the whole transport budget is $750, and at AAA's 2025 monthly averages — $141 insurance, $163 fuel, $138 maintenance — $442 of it is claimed before the payment exists, leaving $308. Over 48 months at 6.39% that payment carries a $13,015 loan and, after fees and a 6.5% sales tax, a car around $19,345. The rule's most useful consequence follows directly: a cheap car with expensive insurance can be less affordable than a dearer one with cheap insurance, and the fastest way to buy more car is to spend less running it.
What a lender is actually solving for
An approval and an affordability ceiling answer different questions, and the gap between them is not a mistake on either side. A lender is estimating the probability that you default and how much it recovers if you do. It holds a lien on a titled asset it can repossess and sell, which recovers a substantial fraction of the balance, so its exposure is bounded in a way your household's is not. Nothing in that calculation requires the payment to leave you anything at the end of the month. The ratios follow from it. Payment-to-income is capped around 15-20% of gross and counts the payment plus insurance only — a narrower basket than the rule's, against double the ceiling. Total debt-to-income is capped near 45-50% for subprime paper, with under 43% a common preference and under 36% considered excellent. Neither test asks for a down payment and neither caps the term. On these defaults the payment-to-income test would allow $1,359 a month, while debt-to-income against $2,100 of existing obligations allows $1,275; the smaller binds, and over the market's 69-month term it buys $76,102 of car — $56,757 above what the rule supports, at an all-in transport cost of 22.9% of gross rather than 10%. One input moves this more than any other and it is not a market price: the rate is your credit band. Experian's Q1 2026 new-car averages run 4.55% for super prime, 6.23% prime, 9.67% near prime, 13.44% subprime and 16.01% deep subprime — an eleven-and-a-half point spread, with used-car bands running 6.30% to 21.77%. The buyers offered the worst rates are also the ones offered the longest terms, which compounds rather than offsets.
How four years became seven
The 4 in the rule now looks eccentric because the market moved without anyone deciding to move it. Experian's Q1 2026 data puts the average new-car loan at 69.48 months; 35.6% of new loans run past six years and 3.3% past eighty-five months. The mechanism is the way cars are sold. A monthly payment is a function of three things — price, rate and term — and of those, the term is the only one a dealer can lengthen without renegotiating anything or costing the lender a cent. So when a buyer says the payment is too high, the term is the lever that gets pulled, and it works: the payment falls immediately and the buyer signs. What the stretch actually buys is worth stating precisely. At the same $308 a month, going from forty-eight months to eighty-four raises the loan that payment supports by roughly $7,800 — from $13,015 to $20,816 — and the interest paid by roughly $3,300. You do not own more car. You own it for longer, you pay more for it, and you spend far longer owing more than it is worth, because an amortizing balance falls slowly at first — early payments are mostly interest — while a car's value falls fastest at first. Trading out mid-term while underwater means rolling the shortfall into the next loan, so the next car starts underwater by the amount of the last one, on a longer term and a larger balance. For scale against all this: the average new vehicle transacted at $49,855 in July 2026, just under the $50,612 record set in December 2025, while the average used listing sat near $27,000. A rule ceiling below the new-car average is not a defect in the rule.
What a price ceiling still does not tell you
The rule is written against gross income deliberately, and that is a real assumption rather than a technicality: tax, retirement contributions and health premiums have a prior claim on the same paycheck, so ten percent of gross is a larger share of what actually reaches your account. Applying it to take-home instead is a legitimate stricter version and costs nothing but typing the net figure in. Three further gaps matter more than people expect. The first is that ten percent belongs to the household, not to the car — a two-vehicle household runs the test once across both, and the second car's insurance and registration come out of the same budget as the first car's payment. The second is what the basket omits even at its widest: parking, tolls, the occasional repair beyond routine maintenance, and the premium surcharge that arrives with a teenage driver. The third is the largest and the least visible. Debt-to-income has one denominator, and a car payment and a mortgage payment compete inside it. On these defaults, $2,100 of existing obligations is the reason the lender's ceiling falls from $1,359 to $1,275 — and the same arithmetic runs in reverse when a mortgage underwriter sees a car payment. Every dollar committed to a car is a dollar of housing capacity spent, and because a mortgage capitalizes a payment over thirty years rather than five or six, the house it costs you is worth several times the car. The last gap is not a number at all: affordability is a price and a duration together. Buying a car the rule allows and replacing it every three years costs more per year of driving than buying a dearer one and keeping it for ten.
Frequently asked questions
What is the 20/4/10 rule exactly?
Put at least 20% down, finance for no more than four years, and keep TOTAL transportation costs at or below 10% of gross monthly income. The 10 is the part almost everyone states wrong: it is not 10% for the car payment, it is 10% for the payment plus insurance plus fuel plus maintenance combined. A calculator that applies the 10% to the payment alone will tell you that you can afford substantially more car than the rule intends.
How much car can I afford on $7,500 a month?
On the default figures here, about $19,345. Ten percent of $7,500 is $750 a month for all transport; insurance, fuel and maintenance at AAA's averages take $442 of that, leaving $308 for the payment. Over 48 months at 6.39% that payment supports a $13,015 loan, which with the cash on hand buys a car around $19,300. That is far below the $49,855 average new vehicle transaction price of July 2026, which tells you where most new-car buyers actually are.
Why is the lender's number so much higher than the rule's?
Because they answer different questions and use different baskets. The rule is advisory and broad: 10% of gross covering everything the car costs, over a four-year term, with 20% down. Lenders underwrite to payment-to-income of 15-20% of gross counting payment and insurance only, and total debt-to-income up to 45-50% for subprime — with no down payment requirement and a term averaging 69.48 months. The lender's question is "will this be approved"; the rule's is "should I do this".
Should I use gross or take-home income?
The rule is written against gross, so that is what the page uses. Applying it to take-home makes it materially stricter, which some people prefer — and you can do exactly that by typing your net figure into the income field. What is not reasonable is applying it to gross and then forgetting that tax, retirement contributions and health premiums come out of the same paycheck first.
Is a longer loan term ever the right answer?
It buys you a bigger car and costs you interest and time underwater. On the default figures, stretching from 48 to 84 months at the same $308 a month raises the price by about $7,800 and the interest by about $3,300 — and you spend an extra three years owing money on a car that is depreciating throughout. The market has drifted this way: 35.6% of new loans now run past six years and 3.3% past 85 months.
Why does 20% down matter so much?
Because a new car loses value faster than a small down payment covers, so a thin deposit puts you underwater from the first month. Being underwater means a total loss or a theft leaves you paying off a car you no longer have. The 20 and the 4 in the rule work together: a large deposit and a fast payoff are the only two things that close that gap.
Can I deduct my car loan interest?
This page does not net anything off for it. A temporary federal deduction for interest on a car loan was enacted in 2025, limited to new vehicles with final assembly in the United States and subject to an income phase-out. It is narrow, time-limited and turns on the vehicle rather than the buyer, so confirm the current cap, the phase-out and your own vehicle's eligibility with a preparer before counting it against the payment.