Auto dealerships are notorious for pushing people to buy more expensive vehicles, so it’s important to understand how much car you can afford before you start shopping. Consider both the total cost of borrowing and your monthly payment when deciding on the right car for you. 

Insurance costs vary depending on the vehicle you choose, so it’s a good idea to estimate those costs before you purchase a car. Generally speaking, you shouldn’t spend more than 10 percent of your take-home pay on your car payment. Here’s how that breaks down for a few different salaries:

Pre-Tax Salary Monthly Car Payment
$30,000 $198
$50,000 $319
$75,000 $456
$100,000 $591


Keep in mind that these are general guidelines. Your take-home pay could be less if you pay self-employment tax, and state income taxes can vary. You’ll also need to evaluate your budget and take into account your other financial obligations when determining the monthly payment you can afford. 

A good way to find out what the best deal on car insurance will be for your new car is to use Insurify. You’ll just need to answer a few questions about the vehicle you are insuring and your driving history, and our artificial intelligence technology will provide you with multiple cheap car insurance quotes from different providers, so you can compare them in one place. And because it’s fast and easy, you can estimate the cost of insurance for several vehicles you’re considering. 

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Why Car Affordability Calculators Won’t Tell You Everything

If you’re wondering how much car you can afford based on your salary, a car affordability calculator can be a good place to start. Car affordability calculators are designed to show you what loan amount you can afford based on a monthly car payment that fits your monthly budget. But you still have to decide what that monthly payment should be. While 10 percent of your post-tax income is generally a good maximum, you may not be able to afford that much if you have student loans or other debt to worry about. 

Furthermore, car affordability calculators don’t factor in things like insurance, maintenance, and fuel costs, which can be pricier for some cars than others. Consider your other financial responsibilities and the costs associated with the vehicle you have in mind when deciding what monthly payment works best for you. 

7 Easy Steps to Determine How Much Car You Can Afford

1. Calculate how much your household earns.

First, add up your income from various sources. These can include salaries for you and your spouse, income from side hustles, alimony, etc. Calculate your tax burden and subtract that amount to determine your post-tax income. 

2. Calculate your household’s average expenses. 

To get started budgeting for your car purchase, figure out how much your household spends on other necessities each month. First, add up your fixed bills, like your mortgage or rent payment and health insurance premiums. Next, look at your past average expenses (a budgeting app can help you break them down) to determine how much income you’ll need to allocate to variable expenses like groceries and personal care items. 

Look to see if there are areas where you can trim your budget to make room for a car payment. For example, if you’re buying a cup of coffee each day, consider making it at home. This could free up more of your monthly income for the cost of car ownership

You’ll also need to take into account payments on other debts and savings goals when determining how much remains for your car payment. 

3. Research car loans and determine your comfort level with debt.

First, determine what down payment you can afford based on what you have in savings and the trade-in value of your current vehicle, if applicable. If you’re planning to use a credit card for your down payment, you should also factor repayment with interest into your budget. Next, compare interest rates from different lenders. You can use a loan-comparison site to check your rates at multiple lenders.

Besides the interest rate, the loan term will also impact your monthly payment amount. Some lenders will give you the option of a seven-year loan, which can reduce your monthly payment and help you afford a more expensive car. But experts generally warn against loan terms longer than five years. That’s because you’ll pay more interest in the long run, especially if you have bad credit. If you only qualify for a high interest rate based on your credit score and choose an 84-month term, you could potentially end up paying double the sticker price of the vehicle over the life of the loan. 

4. New or used? Jot down the pros and cons.

You should consider more than just the price range when deciding between a used car and a new vehicle. There are pros and cons to each. For example, the immediate depreciation of a new car makes it wise to purchase GAP insurance, which is an added cost.

New cars can also be more expensive to insure in general, although certain safety features can get you discounts. On the other hand, used cars may require more maintenance early on, and some used cars aren’t covered by a warranty. Loan APRs are also generally higher on used cars, even if you have excellent credit. Still, a used car is likely to cost less money overall. 

Pros Cons
New Car
  • Best new technology and safety features
  • Warranty included
  • Depreciates quickly
  • More expensive
  • Auto insurance typically costs more
Used Car
  • Costs less money overall
  • Typically cheaper to insure
  • May not be available for leasing
  • Higher APRs on loans


5. Narrow the market and determine your top few picks.

Once you decide which features are important to you in your new car, you can start the car-buying process by looking up prices for various models on sites like Kelley Blue Book or Edmunds. 

When searching for a car, set the maximum sticker price lower than the loan amount you’ve determined you can afford. That’s because you’ll need to account for sales tax and other fees, which can add up to an extra thousand dollars or more. 

6. Calculate maintenance costs for your top picks. (Don’t forget car insurance!)

An easy way to calculate additional costs above the sticker price for your car is to use the Edmunds True Cost to Own (TCO) tool. Based on the car’s make, model, and year, this calculator will estimate the cost over a five-year period for things like interest, depreciation, fuel costs, maintenance, and insurance premiums. 

However, keep in mind this calculator will only deliver an estimate. You can get a better idea of what your insurance premiums will be if you use Insurify to search for customized quotes. It’s fast and easy, so you can pull quotes from a variety of insurers for all the vehicles you’re considering. You’ll just need to answer a few questions to get started. 

7. Determine a final sticker price and loan payment you’re sure you can afford—and make sure to haggle! 

Once you’ve evaluated your budget and accounted for ongoing costs and sales tax, you’re ready to nail down a maximum sticker price. You can bring that number to the dealership or compare car prices online beforehand. Some online car-buying sites don’t leave room for negotiation, but be sure to haggle if you can. 

Conclusion: Tips to Save on Car Insurance Quotes

  • Improve your credit score. In most states, car insurance providers use your credit-based insurance score to determine your premium amount. If you take steps to pay down debt and make on-time payments, you could benefit from a lower premium. 
  • Choose the right vehicle. Some cars are less expensive to insure than others. Cars that are typically cheap to insure include the Subaru Forester and the Honda CR-V. Check out our list of the cheapest cars to insure by average premium. 
  • Take a defensive driving course. Many insurance companies offer discounts to drivers who take defensive driving courses. Some of these can be taken online. It’s worth spending a few hours to get a lower premium. 
  • Raise your deductible. A higher deductible means you share more of the financial responsibility for an accident with your insurer. This allows for a lower premium. Just make sure you have enough money in an emergency fund to cover the deductible amount you choose. 
  • Lower your coverage. If you have a loan or a lease, you’ll typically need full coverage. But if you’re buying a cheap used car outright, it could make sense to opt for lower coverage amounts and get a lower premium. 
  • Ask about discounts. You may be able to get cash back or a discount for installing a telematics device. Most insurance companies also offer discounts for homeowners, good students, safe drivers, and more. 
  • Choose pay-per-mile insurance. If you drive infrequently, you may be able to get a lower rate by choosing an insurer that offers pay-per-mile insurance. 
  • Compare car insurance quotes with Insurify. Every insurer weighs your personal information differently, so some providers will be able to offer you lower premiums than others. Rather than pulling quotes from individual insurers’ websites, save yourself the hassle and use Insurify to compare car insurance quotes from multiple providers in one place. 


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FAQ: How Much Car Can I Afford?

How much car can I afford based on my income?

Generally speaking, you shouldn’t spend more than 10 percent of your take-home income on your car payment. But you’ll also need to evaluate your budget and take into account your other financial obligations when determining the monthly payment you can afford.

How much debt should I take on to buy a car?

It’s okay to take on debt to buy a car, but the bigger your down payment, the less strain on your monthly budget. A good rule of thumb is to put down at least 20 percent for new cars and at least 10 percent for used cars. To determine how much debt you can take on, figure out the monthly payment you can afford. Then, use the loan term and your estimated APR to calculate the maximum amount you should borrow.

Who has the cheapest car insurance?

The cheapest car insurance for you will depend on several factors, including your age and gender, your vehicle and driving history, and your credit score. That’s why it’s important to compare customized quotes from different insurers. In the past, getting quotes from insurance companies was time-consuming and often frustrating. But Insurify uses artificial intelligence technology to pull quotes from multiple insurers at once. You can easily toggle between coverage amounts and deductibles to find a policy that fits your budget.

Updated April 28, 2021

Lindsay Frankel is a full-time freelance writer specializing in personal finance and insurance topics. Her work has been featured in publications such as LendingTree, The Balance,, Bankrate, NextAdvisor, and FinanceBuzz. For the past year, she has written about car insurance for Insurify.