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How it works it out
The calculator runs the loan formula backward: the payment and APR over the term give the most you can borrow. Add your down payment and trade-in equity, then take out sales tax, and you have the price to shop for.
A worked example
With $500 a month, $3,000 down, no trade, 7.5% for 72 months and 6% tax:
- You can borrow $28,918
- Plus $3,000 down is $31,918 to spend, tax included
- So shop for cars up to about $30,110 before tax
Rules of thumb
- 10% rule: keep the car payment under 10% of your gross monthly income, and all car costs (payment, insurance, fuel) under 15% to 20%.
- 20/4/10: put 20% down, finance for no more than 4 years, keep costs under 10% of income. It is strict, but it keeps you from owing more than the car is worth.
- Leave room for insurance, which costs more on newer and pricier cars.
What APR to start with
The credit chips fill in a starting APR. These are typical rates by credit score, not a quote. A bank, credit union or the dealer gives you the real one, and you can type it over ours.
| Credit | Scores | New car APR | Used car APR |
|---|---|---|---|
| Excellent | 720+ | 5.2% | 7% |
| Good | 660 to 719 | 6.9% | 9.7% |
| Fair | 600 to 659 | 9.9% | 14% |
| Rebuilding | Under 600 | 13.5% | 19% |
Starting rates the calculator fills in, rounded from the averages by credit band in Experian's auto finance reports. Your lender's quote is what counts: type it over these.