🚗 Car Affordability Calculator

This calculator works backward from "how much car can I afford" based on a monthly payment. With monthly rate r = APR ÷ 100 ÷ 12 and loan term n (months), the loan principal you can afford is derived from the present-value-of-an-annuity formula.

Principal = PMT × (1 − (1 + r)⁻ⁿ) ÷ r

When the APR is 0% (a promotional 0% financing offer), we avoid dividing by zero and simply use Principal = PMT × n. Adding the down payment and trade-in value to the principal gives the affordable car price, and subtracting the principal from the total paid (PMT × n) gives the total interest.

With a monthly payment of 500, APR of 5%, loan term of 48 months, down payment of 5,000, and no trade-in:

Monthly rate r = 5 ÷ 100 ÷ 12 ≈ 0.004167
Loan principal ≈ 21,711.6
Affordable car price = principal + down payment = 21,711.6 + 5,000 ≈ 26,711.6
Total interest = (500 × 48) − 21,711.6 ≈ 2,288.4

In other words, if you can pay 500 per month for 48 months and put 5,000 down, a car priced around 26,711.6 fits your budget.

The 20/4/10 rule is a widely used car-buying guideline from U.S. consumer finance: put down at least 20%, finance for 4 years or less, and keep payment + insurance + fuel under 10% of income. A shorter loan term reduces total interest and lowers the risk of owing more than the car is worth (negative equity) as it depreciates.

However, the "affordable car price" this calculator produces is closer to the sticker price based on loan principal alone — it does not include taxes, registration, dealer fees, or insurance you would actually pay. Use the Out-the-Door Price Calculator to see the real total, and treat this tool as general guidance, not a substitute for financial advice.