There actually is a calculator to help you answer the question, “How much car can I afford?”
And we found it for you after an exhaustive search.
It may appear as though you have many choices as we learned in our Google search using that phrase, “how much car can I afford” and generating more than 200,000 results.
But looks can be deceiving, and in this case they are.
None of the top 10 results provides a useful affordability calculator to help you figure out how much car you can afford, with four asking for “monthly payment” or “target monthly payment” or “how much can you afford to pay per month” and four more simply explaining the process without a calculator.
But isn’t your question in the first place how much car can you afford? And if it was easy math, why do so many websites devote so much space to trying to explain it?
Consumer experts generally suggest that your “target monthly payment” is the wrong way to start answering the question, and that it can lead down a bumpy financial road starting with an inadequate down payment or a longer term, often to purchase a vehicle you want rather than one you can afford.
Financial advisers long have favored starting the calculation with your monthly gross income, as described in the conservative 20/4/10 rule, with 20 percent of the vehicle price for a down payment, four-year financing and a vehicle price no more than 10 percent of your gross income.
The Eureka moment
So, what was the Eureka moment?
The result we were looking for came in the form of a car affordability calculator from instamotor.com both online and as an app. But the online calculator, which led us to the app, came up almost 60 results into our search, long after most car shoppers would have given up.
The instamotor calculator asks for monthly income, ZIP code and down payment amount, then provides a calculation that incorporates credit score, interest rate and loan term, all of which you can rework. It also provides users the flexibility of calculating affordability on the basis of a “conservative” 10 percent, “affordable” 15 percent and “stretching” 20 percent of gross income.
For example, in our calculation we used the approximate average U.S. household income of around $5,000 per month as our gross, which means, conservatively, we can afford $500 a month. Payments would be $750 a month at 15 percent and $1,000 a month at 20 percent.
The bottom line
Using a $5,000 down payment with financing over 48 months at a 7.5 percent interest rate, the instamotor calculator tells us we can afford to purchase a $25,679 vehicle at 10 percent of gross income and that a $36,019 vehicle at 15 percent of gross income still would be affordable, but that spending $46,358 at 20 percent of gross income would be a stretch.
And the calculator works whether you’re purchasing a new vehicle or pre-owned.
Of course, all of these results change with a different income, down payment, credit score, interest rate, amount borrowed, financing term and what percent of gross income is used. But all of that is adjustable on this calculator so you can fine tune your result.
“Buying a car can be one of the biggest purchases you make,” says instamotor. “Your version of ‘how much car can I afford’ can be very different from the next person.”
But using the right calculator can make that math a lot easier and a lot more helpful.
Otherwise, here’s what we found with the top-ranked websites, starting with the most-popular:
Edmunds.com – This calculator is based on how much car payment you think you can afford.
Nerdwallet.com – Explains how to calculate what you can afford, but provides no calculator.
Moneyunder30.com – This affordability calculator is based on a narrow set of possibilities.
Cars.com – Basically the same as the Edmunds.com calculator above.
Goodfinancialcents.com – Much like the Moneyunder30 calculator – but harder to figure out.
Practicalmoneyskills.com – Basically the same as the Edmunds.com calculator above.
Calcxml.com – Basically the same as the Edmunds.com calculator above.
Interest.com – This site provides a complicated explanation but no calculator.
Consumerreports.org – Takes the same approach as Nerdwallet.com above, and provides no calculator.
Smartasset.com – Same as Nerdwallet and Consumerreports.org.