How to Calculate How Much Car You Can Afford

💰The total loan amount, interest rates, loan term, down payment, and credit history are the key factors that affect your monthly car payments.

🔍Calculating your monthly income after tax and comparing it with the recommended 10-15% car payment rule helps determine if you can afford the car.

✅Using the 10-20 rule, where monthly car payments should not exceed 10% of your income and total car expenses should stay below 20%, helps ensure a balanced budget.

📉Paying attention to your credit history and getting pre-approved for a car loan can improve your chances of qualifying for lower interest rates and better loan terms.

📊Using a car payment amortization table can help visualize how your monthly payments are divided between principal and interest over the loan term.

What factors should I consider when determining how much car I can afford?

—Consider your total loan amount, interest rates, loan term, down payment, and credit history. These factors will determine your monthly car payments.

How can I calculate my monthly income after tax?

—Use an online tax calculator specific to your province to input your annual income and determine your after-tax income.

What is the 10-15% car payment rule?

—According to this rule, your monthly car payment should not exceed 10-15% of your after-tax monthly income.

What is the 10-20 rule for total car expenses?

—The 10-20 rule states that your monthly car payments, including insurance, gas, repairs, and maintenance, should not exceed 20% of your after-tax monthly income.

How can I improve my chances of getting better loan terms for a car?

—Maintain a good credit history, consider a larger down payment, and get pre-approved for a car loan to improve your chances of qualifying for lower interest rates.

00:00Avoid stretching yourself too thin when buying a car by calculating how much you can afford.

04:00Total loan amount, interest rates, loan term, down payment, and credit history are the key factors impacting your monthly car payments.

08:00The 10-15% car payment rule suggests your monthly car payment should not exceed 10-15% of your after-tax income.

11:00The 10-20 rule states that your total car expenses, including insurance, gas, repairs, and maintenance, should not exceed 20% of your after-tax income.

12:00Consider your credit history, down payment, and pre-approval for a car loan to improve your chances of better loan terms.