What is a good monthly payment for a car?
According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.
If you're looking for a few tips on managing a high car payment, you're not alone. The average monthly car payment is now a record $733, according to Edmunds. And even if your monthly auto loan payments are around $500 per month, that still may be uncomfortably high.
In general, it's recommended to spend no more than 10% to 15% of your monthly take-home income on your car payment, and no more than 20% on your total vehicle expenses, including insurance and registration. Read on to learn how you can determine how much car you can afford based on your financial situation.
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. Check if you can really afford the payment by depositing that amount into a savings account for a few months.
A high car payment is a subjective term and can vary depending on a person's individual financial situation and priorities. Generally, however, a car payment is considered high if it exceeds 10-15% of a person's gross monthly income.
How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.
Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.
Car payment statistics
The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533. 39.20 percent of vehicles financed in the third quarter of 2023 were new vehicles. 60.80 percent of vehicles financed in the third quarter of 2023 were used vehicles.
you comfortably afford under an 80 000 salary. a volkswagen golf gti audi a3 a toyota. avalon the kia stinger and the cadillac ct4.
If you make a $50,000 gross salary, after taxes (depending on where you live) your monthly take-home pay is roughly $3,230. Based on the 10% rule, you could afford, at most, a $323 monthly car payment. If you take out a 60 month (5 year) auto loan at 8% interest, you can afford a $17,000 car.
Which is the most reliable car?
- Lexus NX (2014-2021) Reliability rating 99.8% ...
- Suzuki Swift (2017-present) Reliability rating 99.5% ...
- Lexus NX (2021-present) Reliability rating 99.4% ...
- Suzuki Ignis (2016-present) ...
- Toyota Yaris (2011-2020) ...
- Lexus UX (2019-present) ...
- BMW iX3 (2021-present) ...
- Hyundai Ioniq Hybrid (2016-2022)
Down Payment
The rise is attributed to various factors: high interest rates, increased automaker prices, and dealer practices. Reaching a new record, 17.5% of new car loans in Q3 2023 required a monthly payment of $1,000 or more.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
According to experts, a car payment is too high if the car payment is more than 30% of your total income.
For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.
The 35% rule states that the most that you should spend. on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000.
I personally would not spend more then a third to half of what your yearly salary is. So a $40,000 vehicle would be the low and recommended while $60k is the highest. That still puts you in the territory of an Audi S4 or similar vehicle. But don't go out buying GTRs or Ferrari Californias.
To afford this, you would need to have a gross income of at least $53,666.67 per year. Unless you use a different financing method like a Savings Club. You would get a lower rate for the same length of the term and be able to afford the vehicle more comfortably.
For net monthly income, you're gonna need to make four thousand. six hundred and sixty seven dollars per month. So before taxes and other deductions, at a minimum. you'll need to make 70 thousand dollars per year. to afford a 40 thousand dollar car.
An affordable car payment would be one that doesn't exceed $600 a month, based on the rule of thumb that your car payment shouldn't be more than 15% of your take-home pay. If you take out a 60-month car loan at 8% APR, you should aim to take out a car loan of less than $30,000.
What is the rule of thumb for car payments?
As a general rule of thumb, many experts suggest following the 20/4/10 rule, which holds that you should set aside 20% of a car's purchase price for a downpayment, take 4 years to repay your car loan, and ensure that your monthly transportation costs don't exceed 10% of your monthly income.
Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses. These expenses include any money you put towards your new vehicle, including gas, insurance, and loan payments.
But no matter the reason for your $750 monthly car payment, the reality is that it's a lot of money. And if you're going from having no car payment to a payment of $750 a month, it could really constitute a shock to your finances. Here are a few steps you can take to cope with such a large car payment.
The average new car, as of spring 2023 was $48,000, according to Kelly Blue Book. That has sent the average car payment to a record high of $725. But that's chump change for some shoppers because a separate report from Edmunds.com says one in 10 buyers is now paying $1,000 a month.
Your monthly car loan payment is largely affected by your loan amount, interest rate and loan term. Your credit, debt and income can play a key role in determining your overall loan cost, so it's important to know your current credit and take steps to improve it, if necessary.
References
- https://wallethub.com/answers/pl/how-much-can-i-borrow-with-a-650-credit-score-1000508-2140806921/
- https://www.bankrate.com/loans/auto-loans/average-monthly-car-payment/
- https://www.creditkarma.com/personal-loans/borrow/50000-loan
- https://www.marketwatch.com/guides/car-loans/72-month-auto-loan-rates/
- https://www.investopedia.com/what-credit-score-do-you-need-to-buy-a-car-5181034
- https://wallethub.com/answers/pl/how-to-get-a-30000-loan-1000433-2140754229/
- https://www.quora.com/What-sporty-car-can-I-buy-with-a-salary-of-120-000
- https://www.creditkarma.com/auto/i/car-loan-payment-factors
- https://time.com/personal-finance/article/how-much-should-my-car-payment-be/
- https://wallethub.com/answers/pl/monthly-payment-on-a-20000-personal-loan-1000450-2140762725/
- https://wallethub.com/answers/pl/what-credit-score-do-i-need-for-a-50000-personal-loan-1000461-2140767477/
- https://www.fool.com/the-ascent/personal-loans/how-much-car-afford/
- https://stellarfi.com/answer/what-credit-score-do-you-need-to-buy-a-50k-car
- https://listerhill.com/blog/2019/6/getting-auto-loan-with-600-credit-score
- https://www.woodhouselincoln.com/blog/2022/july/6/lincoln-financing-101-the-20-4-10-rule-of-car-buying.htm
- https://www.credit.com/credit-repair/diy-credit-repair/
- https://www.nj.com/personal-finance/article/how-much-car-can-i-afford
- https://www.gtfcu.org/articles/how-long-are-auto-loan-understanding-car-loan-length
- https://www.upstart.com/credit-score/639-credit-score
- https://www.carsdirect.com/auto-loans/can-you-make-a-50-down-payment-on-a-car
- https://www.fico.com/blogs/perfect-credit-score-understanding-850-fico-score
- https://www.quora.com/What-should-your-income-be-to-afford-a-60-000-car
- https://www.jdpower.com/cars/shopping-guides/how-much-would-a-20000-car-loan-cost-each-month
- https://www.investopedia.com/why-more-people-than-ever-are-paying-over-usd1000-a-month-for-new-cars-8347761
- https://www.marketwatch.com/guides/car-loans/auto-loan-interest-rates-by-credit-score/
- https://www.tiktok.com/@mikeytaylor/video/7275045926069161258
- https://www.southparknissan.com/blog/which-credit-score-do-car-dealerships-use/
- https://www.quora.com/What-income-should-you-have-to-buy-a-250-000-car
- https://wallethub.com/answers/cc/how-long-to-pay-off-25000-credit-card-debt-1000423-2140858501/
- https://www.toyotadirect.com/blogs/3084/auto-loan/what-is-considered-a-high-car-payment/
- https://wallethub.com/best-personal-loan-600-credit-score
- https://www.edmunds.com/calculators/affordability.html
- https://www.investopedia.com/best-auto-loan-rates-4846394
- https://www.marketwatch.com/guides/car-loans/bad-credit-car-loans/
- https://www.fool.com/the-ascent/personal-loans/car-loan-credit-score/
- https://www.tiktok.com/@chase.yokoyama/video/7062077283602959663
- https://www.marketwatch.com/guides/car-loans/tesla-finance/
- https://www.dicksaysyes.com/auto-blog/what-do-car-dealerships-look-at-for-financing/
- https://www.nerdwallet.com/article/loans/auto-loans/bad-credit-score-car-loan
- https://www.nerdwallet.com/article/finance/credit-score-needed-to-buy-car
- https://www.abc27.com/news/consumer/dont-waste-your-money/dont-waste-your-money-700-car-payments/
- https://www.jdpower.com/cars/shopping-guides/what-car-loan-can-i-get-with-a-650-credit-score
- https://www.lendingtree.com/credit-repair/how-auto-loan-affect-your-credit-score/
- https://www.fool.com/the-ascent/personal-finance/articles/how-much-would-the-monthly-payments-be-on-a-25000-car/
- https://www.fool.com/the-ascent/personal-loans/articles/3-tips-to-manage-a-500-per-month-car-payment/
- https://www.hyundaiofasheville.com/finance/car-buying-tips/how-much-down-payment-for-a-car-with-bad-credit/
- https://www.nerdwallet.com/article/loans/auto-loans/much-spend-car
- https://www.caranddriver.com/auto-loans/a41169213/calculate-how-much-car-you-can-afford/
- https://www.lendingtree.com/auto/calculators/payment/
- https://www.upstart.com/credit-score/720-credit-score
- https://www.jdpower.com/cars/shopping-guides/how-much-is-the-monthly-payment-on-a-30000-car-loan
- https://www.fool.com/the-ascent/personal-loans/articles/3-tips-to-manage-a-750-per-month-car-payment/
- https://money.usnews.com/loans/personal-loans/articles/how-to-secure-a-30-000-personal-loan
- https://www.marketwatch.com/guides/personal-loans/50000-personal-loan/
- https://www.lendingtree.com/student/how-to-pay-off-30k-student-loans/
- https://www.caranddriver.com/auto-loans/a43048531/what-credit-score-do-you-need-for-a-car-loan/
- https://benjamincarlson.medium.com/how-much-car-can-i-actually-afford-03ba34eeebdf
- https://www.capitalone.com/learn-grow/money-management/fico-score-8/
- https://wallethub.com/answers/pl/what-is-the-interest-rate-on-a-25000-personal-loan-1000502-2140800429/
- https://www.bankrate.com/loans/auto-loans/car-loan-down-payment-benefits/
- https://www.credit.com/blog/720-good-credit-score/
- https://fortune.com/recommends/loans/how-much-car-can-i-afford/
- https://www.experian.com/blogs/ask-experian/what-is-a-good-credit-score-for-an-auto-loan/
- https://www.marketwatch.com/guides/car-loans/how-much-down-payment-for-a-car/
- https://www.rockhillnissan.com/when-is-a-car-payment-too-high/
- https://www.nerdwallet.com/article/loans/auto-loans/average-monthly-car-payment
- https://www.whatcar.com/news/reliability-survey-most-reliable-cars/n26137
- https://www.exclusivemotorcarsmd.com/blog/large-down-payment-pros-cons-used-cars
- https://www.autotrader.com/car-affordability-calculator
- https://www.finn.com/en-US/blog/car-buying/what-is-the-average-down-payment-on-a-car
- https://www.mortgagecalculator.org/calcs/car.php
- https://www.usbank.com/home-loans/mortgage/first-time-home-buyers/credit-score-for-mortgage.html
- https://lanterncredit.com/auto-loans/down-payment-size
- https://www.credible.com/blog/personal-loan/30000-loan/
- https://www.thezebra.com/resources/driving/how-much-car-can-i-afford/
- https://www.fool.com/the-ascent/personal-finance/articles/how-much-would-the-monthly-car-payment-be-on-a-50000-car/
- https://www.credible.com/blog/refinance-student-loans/pay-off-30k/
- https://money.usnews.com/loans/personal-loans/articles/how-to-get-a-50-000-personal-loan
- https://www.americanfinancing.net/saving-money/extra-mortgage-principal-payments
- https://www.horizonfcu.org/5-ways-to-pay-off-a-loan-early/
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.creditkarma.com/personal-loans/borrow/30000-loan
- https://www.proctorhonda.com/auto-loan-qualification-credit-score-vehicle-interest-rate/
- https://wallethub.com/answers/pl/monthly-payment-on-50000-personal-loan-1000450-2140762731/
- https://www.creditkarma.com/personal-loans/borrow/25000-loan
- https://caredge.com/guides/average-car-payment
- https://www.moneyunder30.com/car-affordability-calculator/
- https://www.bankrate.com/loans/auto-loans/what-credit-score-do-you-need-to-buy-a-car/
- https://www.caranddriver.com/auto-loans/a43149333/credit-score-car-dealers-use/
- https://www.lendingtree.com/auto/what-credit-score-is-needed-to-buy-a-car/
- https://wallethub.com/answers/pl/credit-score-to-get-30000-personal-loan-1000461-2140767467/
- https://www.progressive.com/answers/car-down-payment/
- https://www.quora.com/What-interest-rate-should-I-get-with-a-700-credit-score-on-a-car-loan
- https://www.tiktok.com/@humphreytalks/video/7249083527529073966
- https://cars.usnews.com/cars-trucks/car-loans-and-leasing/car-payment-calculator
- https://www.marketwatch.com/guides/car-loans/how-much-car-can-i-afford/
- https://www.bankrate.com/loans/auto-loans/0-apr-car-deals-are-they-worth-it/