Phase 10 · Auto & Mobility
Car Affordability Calculator
The dealer sizes the payment; you should size the price. Run the 20/4/10 rule — 20% down, 4-year loan, total costs under 10% of income — to a max you can actually live with.
How much car can I afford on my salary?
The 20/4/10 rule: at least 20% down, a loan no longer than 4 years, and total car costs under 10% of gross income. Crucially, that 10% covers insurance, fuel and upkeep too — so the loan payment is what's left after those, not the whole budget.
- Worked example (defaults on this page): $70,000 income allows $583/month of total car cost. After $300 of insurance, fuel and upkeep, only $283 is available for the loan.
- At 7% over 48 months that supports an $11,832 loan — with $5,000 down, a maximum price near $16,832.
- The 4-year term is the part people break first. Stretching to 84 months buys a more expensive car while guaranteeing years of negative equity, since the loan outlasts the depreciation.
- Dealers size the monthly payment because it hides the price, the term and the rate at once. Sizing the price instead is what keeps all three honest.
Under the hood
The math, fully exposed
We carve running costs out of the 10% budget, then back out the price the rest supports:
Max total cost = 10% × income ⁄ 12
Max loan payment = max total cost − insurance, fuel & upkeep
Loan amount = payment ⁄ k, k = r(1+r)n ⁄ ((1+r)n−1)
Max price = min(loan + down, down ⁄ 20%) (20%-down rule)
- Running costs come first: insurance and fuel share the 10% with the payment — high running costs shrink the car you can finance.
- Two caps, take the lower: the payment budget or the 20%-down rule — whichever binds sets the price.
- Term is a trap lever: stretching past 48 months lowers the payment but keeps you underwater on a fast-depreciating asset.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
What is the 20/4/10 rule for buying a car?
It is a simple guardrail: put at least 20% down, finance for no more than 4 years, and keep your total monthly car costs — loan payment plus insurance, fuel and maintenance — under 10% of your gross monthly income. Stay inside all three and a car is unlikely to wreck your budget. Break them and you risk being upside-down on a depreciating asset that drains your cash flow.
Why does the 10% include insurance and gas, not just the payment?
Because the payment is only part of what a car costs you. Insurance, fuel, maintenance and registration can easily add $300–$500 a month, and that money competes with the loan for the same 10% budget. Sizing affordability on the loan payment alone is how people end up "able to afford the car" but unable to afford owning it. This tool subtracts those running costs first.
Why only a 4-year loan?
Cars depreciate fast — often 40–50% in the first few years. Stretch the loan to 6, 7 or 8 years and you spend most of it owing more than the car is worth, paying interest on value that has already evaporated. A 4-year term keeps you building equity faster than the car loses value, and forces you toward a price you can genuinely afford rather than one a long term disguises.
Is a longer loan ever okay?
Occasionally — a very low promotional APR can make a longer term defensible if you invest the difference and the car is reliable. But for most buyers a long auto loan is a warning sign that the car is too expensive. If you need 7 years to fit the payment, the honest answer is usually a cheaper car. This is an educational model, not financial advice.