The loan approval process doesn’t take into account the fact that you may have a medical emergency to pay for, or that you may want to go on vacation at some point, or that you don’t want to eat ramen for the duration of your car loan. Even though that higher payment may get you into a nicer car, don’t go for it. Keep in mind that when you apply for a car loan, you may hear that you can handle a payment that’s higher than one that fits into the one-third rule. It allows you to have money left each month to pay for necessities like housing and groceries (because we all like having a roof over our heads and eating) and save money for the future. Keeping all of your debt repayments to less than a third of your monthly income is what most personal finance experts recommend. If you have a $700 student loan repayment every month, you can reasonably spend about $450 each month on a car payment. The remainder is how much you can spend on a car payment.įor example, let’s say you take home $3,500 per month a third of that is $1,155. If you have credit card debt, student loan debt, or medical debt payments, you need to deduct those from that number. It’s important to note that this figure includes the total amount you should spend on all debt repayment. How Much Should My Car Payment Be?Ī car loan is debt, and your total monthly debt payments should not be more than a third of your monthly take-home pay. Not sure what each field is asking for? Read on and we’ll explain each one. To use the calculator, you just need to need to fill out each field.

Then you can focus your shopping on cars with that price (or lower).

We’ll also tell you the price of the car you can afford. Instead of getting to the dealership only to find out that you can’t afford the payments on the kind of car loan you need for your dream ride, use our car affordability calculator to help you find the car loan payment that fits with your monthly budget.

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