How much car can I afford?
Includes the hidden costs: insurance, fuel, maintenance. The 20/4/10 rule (20% down, ≤4-year loan, ≤10% of income on transport) prevents you from going upside-down on the loan.
The car-affordability question is not "what monthly payment can I stomach?" — it's "what's the total cost relative to my income?" Dealerships sell you the payment number specifically because it hides the term length, the down payment shortfall, and especially the insurance/fuel/maintenance that you'll pay every month regardless.
Why depreciation makes the down payment critical
A new car loses roughly 20% in year one and 50% by year five. If you put 0% down on a $40K car at 7.5% over 6 years, your loan balance after 12 months is ~$34,500. The car is worth ~$32K. You're $2,500 underwater — owing more than the car is worth. If you total it (insurance pays market value) or need to sell, you write a check at the end. With 20% down, you start at $32K loan on $32K asset, ending year one with positive equity.
True monthly cost of car ownership (2026 averages)
| Category | Compact sedan | Mid-size SUV | Pickup truck |
|---|---|---|---|
| Loan payment | $385 | $525 | $640 |
| Insurance | $130 | $155 | $175 |
| Fuel | $140 | $200 | $280 |
| Maintenance + reg | $75 | $90 | $110 |
| Total monthly | $730 | $970 | $1,205 |
Income needed to keep this at 10% of gross: $87,600 / $116,400 / $144,600 respectively. Most US households can afford a sedan; many cannot honestly afford a pickup.
The 84-month loan trap
The most dangerous trend in auto lending: 84-month (7-year) loans. Sample: $40K car, 7.5% APR. At 48 months: $968/mo, $6,422 total interest. At 84 months: $613/mo, $11,492 total interest. The 7-year option saves $355/mo but adds $5,070 in interest and leaves you upside-down for 5+ years. By month 84, the car typically needs major repairs or replacement — meaning you're paying off a car you no longer want.
Related calculators
- Auto loan calculator — monthly payment + total interest for a specific car
- Car loan calculator — alternative interface with deeper amortization
- 50/30/20 budget calculator — fit transportation inside the broader budget
- Take-home pay calculator — what's actually arriving each month