Car Affordability Calculator (2026)
Apply the 20/4/10 rule: 20% down, a 4-year loan, and total car costs under 10% of gross income.
How Much Car Can You Afford?
Your pay before taxes, per month.
Cash you can put down today, not borrowed.
Annual interest rate on the auto loan.
Everything the car costs each month besides the loan payment.
Check a specific car against the rule
Same 48-month term and 20% down payment apply to this check.
Check-a-car result
What Is the 20/4/10 Rule?
The 20/4/10 rule is a simple guardrail for car buying. Put at least 20% down, finance for no more than 4 years (48 months), and keep your total monthly car costs at or under 10% of your gross monthly income. It is a planner’s rule of thumb, not a lender’s rule: no bank checks it, and a dealer will happily sell you a car that breaks all three parts. Its value is that it keeps a car purchase from quietly eating the rest of your budget.
Each number does a different job. The 20% down payment keeps you from owing more than the car is worth the moment you drive off the lot, since new cars lose value fast in the first year. The 4-year term caps how much interest you pay and how long you carry the debt. The 10% ceiling protects your cash flow: it counts everything the car costs, not just the loan payment.
What Counts Toward the 10%?
The 10% ceiling covers total car costs, not just the monthly payment. That means the loan payment plus insurance, fuel, and maintenance, and ideally also registration and routine servicing. Many buyers shop by payment alone and get surprised by the rest: insurance on a financed car is usually full coverage, fuel adds up with a long commute, and tires, brakes, and oil changes are not optional. If you count only the payment, a car that looks affordable can easily run 15% or more of your income in reality.
That is why this calculator asks for your running costs separately. The payment budget it shows is what is left after those costs are subtracted from your 10% cap. If your running costs are high, your payment budget shrinks, and so does the car you can afford under the rule.
The Formula
The maximum car price is worked backward from your monthly budget. First, the 10% cap is 10% of your gross monthly income. Subtract your monthly running costs to get your payment budget. Then find the loan that payment budget supports over 48 months at your APR, using the present-value formula for an annuity. Finally, because the loan covers only 80% of the price after a 20% down payment, divide the loan by 0.80 to get the maximum car price.
Payment budget = 10% cap minus monthly running costs
Maximum loan = payment budget x (1 minus (1 plus monthly rate) ^ minus 48) / monthly rate
Maximum car price = maximum loan / 0.80
Required down payment = maximum car price x 0.20
For the check-a-car section the math runs forward instead: 20% of the car price is the down payment, the remaining 80% is financed over 48 months at the APR you enter, and the resulting payment plus your running costs is compared with your 10% cap.
Worked Example: $6,000 a Month, 7% APR
| Calculation | Amount | |
|---|---|---|
| Gross monthly income | $6,000 | |
| 10% total car cost cap | $6,000 x 0.10 | $600.00 per month |
| Monthly running costs | insurance, fuel, maintenance | $200.00 |
| Monthly payment budget | $600.00 minus $200.00 | $400.00 |
| Maximum loan (48 months at 7% APR) | present value of $400 a month | $16,704.08 |
| Maximum car price | $16,704.08 / 0.80 | $20,880.10 |
| Required 20% down payment | $20,880.10 x 0.20 | $4,176.02 |
| Cash available for down payment | $5,000 |
With $5,000 in cash, this buyer clears the rule comfortably: the required down payment is $4,176.02, leaving $823.98 spare. But the same buyer checking a $30,000 car at 7% APR fails the rule: 20% down is $6,000, the $24,000 loan costs $574.71 a month over 48 months, and with $200 of running costs the total is $774.71 a month, which is $174.71 over the $600 cap. Either a cheaper car or a bigger income is needed to pass.
Why a Longer Loan Is a Trap
A longer loan lowers the monthly payment, which is exactly why dealers offer 72- and 84-month terms. The trade-off is steep: you pay far more total interest, and because cars lose value fastest in the first few years, you spend years owing more than the car is worth. That is called being upside down, and it traps you if the car is totaled or you need to sell it. The 4-year limit in the rule exists to keep the loan shorter than the car’s useful life and to keep total interest in check. If a car only fits your budget on a 7-year loan, it does not fit your budget.
Is 10% Realistic in Today’s Market?
Some planners now suggest 12% to 15% as a more realistic total-cost ceiling in today’s market, where average new-car prices and interest rates are both higher than they were when the 20/4/10 rule became popular. There is a fair argument there: a strict 10% cap on a modest income may point to a car price that buys very little in 2026. This tool applies the classic 10% on purpose, because the point of a guardrail is to show you the disciplined answer first. If you choose to stretch toward 12% or 15%, do it knowingly, with the extra cost coming from a budget line you have actually freed up, not from hope.
What the Rule Does Not Cover
- It is not a lender’s approval. A bank may approve you for far more than the rule allows. Approval measures the lender’s risk, not your budget’s health.
- It ignores your other debts. If you already carry student loans, credit card debt, or a large rent payment, even 10% on a car may be too much. Check the total picture with a budget tool.
- It assumes a steady income. Variable, seasonal, or commission income makes a fixed car payment riskier than the rule alone suggests. Use a conservative monthly income figure.
- It does not price the car itself. Reliability, depreciation, and repair history matter as much as the payment. A cheap car that breaks down constantly is not a bargain.
