BCBetter Calculators

Car Loan Affordability Calculator

Find the maximum car price you can afford based on your monthly budget, interest rate, and loan term.

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Enter your values and click Calculate

How It Works

The calculator inverts the standard loan amortization payment formula to solve for the maximum loan principal given a target payment. The standard formula is M = P × r(1+r)^n ÷ ((1+r)^n − 1), where M is the monthly payment, P is the principal, r is the monthly interest rate, and n is the number of payments. Rearranging to solve for P gives: maxLoan = M × ((1 − (1+r)^−n) ÷ r). The monthly rate r is the annual rate divided by 12 (e.g., 7% annual = 0.5833% monthly = 0.005833). This is the present value of an ordinary annuity formula. The maximum car price is then maxLoan + downPayment. Total interest paid is (monthlyPayment × n) − maxLoan. As an example: $400/month at 7% for 60 months gives maxLoan = 400 × ((1 − 1.005833^−60) ÷ 0.005833) ≈ $20,198.

Examples

Standard Budget
$400/month budget at 7% for 5 years with a $3,000 down payment.
Result: Max loan ~$20,198. Total buying power ~$23,198 with ~$3,800 total interest.
Higher Payment
$600/month budget at 6% for 5 years with a $5,000 down payment.
Result: Max loan ~$31,030. Total buying power ~$36,030.
Longer Term
$350/month at 8% for 7 years with no down payment.
Result: Max loan ~$21,868. Note: more total interest paid over 84 months.

Frequently Asked Questions

Should I include insurance and tax in my budget?
This calculator covers loan payments only. A realistic monthly car budget should also account for insurance (often $100–$300/month), registration fees, fuel, and routine maintenance. Financial advisors suggest your total car costs — including all of the above — should not exceed 15–20% of monthly take-home pay.
Is a longer loan term better?
A longer term reduces the monthly payment, which helps you qualify for a more expensive vehicle, but it significantly increases the total interest paid. A 7-year loan at 8% on a $25,000 vehicle costs over $7,700 in interest versus about $5,500 on a 5-year term. Longer terms also increase the risk of being 'underwater' — owing more than the car is worth — particularly in the first few years.
Should my down payment be as large as possible?
Generally yes — a larger down payment reduces the loan amount, lowers monthly payments, decreases total interest, and reduces the risk of going underwater. A down payment of at least 20% is commonly recommended for new cars, though for used cars, 10% or a specific dollar amount may be more practical depending on the vehicle's price and depreciation rate.

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