Can You Afford That Car? A Simple Guide to Monthly Payments
Buying a car is such an exciting journey—there’s nothing like the thrill of getting behind the wheel of something completely yours! With all the bells and whistles available, getting a bit sidetracked is easy. But what really matters is making sure you stick to your budget!
Whether this is your very first vehicle or you’re looking to upgrade, the important question to consider is: How much can I actually afford? In this blog, let’s take it step by step, so you can hit the road with confidence and peace of mind!
So, What Impacts Your Monthly Car Payment?
Before jumping into numbers, it’s important to understand what goes into your monthly car payment. Here are the key terms to know:
Down Payment
This is the amount you pay upfront. A larger down payment reduces the amount you need to borrow and can shrink your monthly payments.
Loan Term
This is how long it usually takes to pay off a car loan—typically 36 to 84 months. Longer terms result in smaller monthly payments, but you'll end up paying more interest over time.
Interest Rate
This is simply the percentage lenders charge for the wonderful opportunity to borrow money to help you buy a vehicle. This cost of borrowing gets added to your monthly payments, which can make the total amount you pay over the life of the loan a bit higher than you might expect!
Total Cost of Ownership
Your monthly payment is just part of the equation. Don’t forget insurance, maintenance, fuel, registration, and repairs. These costs can add hundreds to your monthly car budget.
Want to play around with different scenarios? Try our free Car Payment Calculator to see how down payment, loan term, and interest rate affect your payments.
How Much Should You Spend on a Car?
A general rule of thumb:
Your monthly car payment should be no more than 10–15% of your monthly take-home pay.
And if you factor in gas, insurance, and maintenance, aim to spend no more than 20% of your monthly income on total vehicle expenses.
Let’s Look at a Few Examples.
Let’s go over different scenarios to help you figure out what your car payments might look like. We’ll also check out various vehicle options, from compact cars to roomy family SUVs. With Go Auto, we’ll find the perfect ride that fits your budget and lifestyle.
Scenario #1: First-Time Buyer
Income: $3,500/month after tax
Target car payment: $350/month (10%)
Ideal total vehicle budget (with insurance, gas, etc.): $700/month
With $2,000 down and good credit, this person could consider a reliable used SUV or sedan around the $20,000 range.
Scenario #2: Young Family
Income: $8,000/month after tax
Target car payment: $600–$750/month
They’re likely looking for something bigger—maybe a mid-size SUV or minivan. With $5,000 down, a max budget of $55,000 is most likely doable.
Explore options in the 35,000 – 55,000 price range
Scenario #3: Recent Graduate with No Credit
Income: $3,000/month
If you're building credit or are new to financing, staying under 10% is key. In this case, a lower-cost used vehicle, plus a co-signer or pre-approval can help.
Don't Forget the Other Costs
When evaluating the total cost of owning a vehicle, it is crucial to look beyond just the sticker price. Here are some key factors to consider:
- Insurance: The cost of insurance can vary greatly depending on your car type, age, and driving history. It's a good idea to gather quotes from different providers so you can better understand your potential monthly or annual expenses.
- Fuel Costs: Gasoline expenses can change depending on whether you're driving in the city or on the highway. Driving in the city can lead to higher fuel consumption because of all the stops, which can really impact your overall budget.
- Maintenance: Regular maintenance is essential for your car’s smooth operation. This includes things like oil changes, tire replacements, and brake checks, which help prevent costly repairs down the line.
- Unexpected Repairs: Even with proper care, unexpected repairs can pop up due to mechanical failures or accidents. It’s smart to budget for these costs since they can surprise you and lead to financial strain if you're not prepared.
What About My Credit Score?
We know, this can be an intimidating question! But, your credit score can significantly affect your interest rate, which impacts your overall monthly payment. If your score is low, don’t panic—Go Auto offers options for bad credit financing, no credit history, and co-signed loans.
What's your credit score? Find out with Go Auto. This information will never be shared without your consent.
Ready to See What Fits Your Budget?
Buying a car doesn’t have to be overwhelming. The key is planning smartly and knowing your numbers. Whether you’re just starting out or ready to get pre-approved, Go Auto is here to help you every step of the way.
Take the Next Step
- Use our Car Loan Calculator
- Get Pre-Approved in Minutes
- Talk to a Go Auto Finance Expert
- Browse Our Inventory
- Learn the Difference: Buying vs. Leasing
The right car for you isn’t the flashiest or the fastest—it’s the one that fits your life and your budget. With the right tools and support, you can drive away knowing you made a wise, stress-free decision.
