Car Affordability Calculator
Find out how much car you can afford using the 20/4/10 rule
Maximum Vehicle Price
$ 36,874
Based on a $625/mo budgetMonthly Payment Limit (10% of Income) $625
Recommended Loan Amount $26,874
Down Payment Applied $10,000
Total Interest over 4 years $3,126
Payment Breakdown
Balance Over Time
Understanding the 20/4/10 Rule
The 20/4/10 rule is a conservative guideline used by financial experts to ensure a car remains affordable over the long term.
20% Down Payment
Putting 20% down helps prevent 'negative equity' (owing more than the car is worth) as soon as you drive off the lot.
- Reduces the total loan amount and interest paid.
- Provides a buffer against rapid initial depreciation.
- Often results in better interest rate offers from lenders.
4-Year Loan Term
Limiting your loan to 48 months (4 years) ensures you payoff the car while it still has significant value.
- Saves thousands in interest compared to 72 or 84 month loans.
- Helps you build equity in the vehicle faster.
- Aligns your debt repayment with the car's useful life.
10% of Gross Income
Your total monthly transportation costs (loan payment, insurance, fuel) should ideally stay under 10% of your gross monthly income.
- Ensures you have enough budget for other savings and expenses.
- This calculator focuses on just the loan portion for simplicity.
- Keep in mind insurance costs can add another 2-3% of your income.