Car Affordability Calculator converts your budget, down payment, trade-in value, sales tax, and interest rate into the maximum car price your monthly loan payment can support.
Calculate the Maximum Car Price You Can Afford on a Monthly Budget
This calculator reverses the loan payment formula to show the maximum car price a fixed monthly payment budget, down payment, trade-in value, sales tax rate, and interest rate will support. Car shoppers who know what they can pay per month but not what price that translates to use it to set a realistic search range before visiting a dealer.
Enter Your Budget, Cash, and Loan Term
Enter your monthly loan payment budget, down payment, trade-in value, state sales tax rate, and interest rate in your selected currency, plus the loan term in months. The calculator assumes a nominal annual percentage rate (APR) compounded monthly, not an annual percentage yield, and returns the maximum car price your budget supports.
How the Calculator Reverses the Loan Formula to Solve for Price
The calculator first solves for the loan amount your monthly budget supports using the present value of an ordinary annuity formula, the same present-value calculation used in reverse to build a standard amortization schedule:
$$PV = PMT \times \frac{1 – (1+r)^{-n}}{r}$$
where $PMT$ is your monthly budget, $r$ is the annual rate divided by 12, and $n$ is the loan term in months. Adding your down payment and trade-in value to that loan amount gives your total purchasing power.
The calculator then solves backward for the car price that, once sales tax on the price minus your trade-in is added, exactly consumes that purchasing power. A common input mistake is entering the interest rate as a decimal, such as 0.05 instead of 5, which the calculator reads as 0.05% and returns an inflated affordable price no real lender would approve.
Monthly budget, down payment, trade-in value, and sales tax must be zero or greater, and the calculator will not compute a result with negative entries or a loan term of zero. An interest rate of 0% is valid and switches the loan-amount formula to a simple sum of payments across the term rather than the present-value calculation, since that calculation is undefined at $r = 0$.
One interaction the calculator does not resolve on its own: if you still owe money on the vehicle you’re trading in, only your equity, the trade-in value minus any remaining loan payoff, actually adds to your purchasing power, so entering the full trade-in value without netting out a payoff overstates what you can afford.
Because the result depends entirely on the budget, rate, and term you enter rather than a lender’s underwriting decision, the maximum price shown is an estimate for planning purposes and does not reflect loan pre-approval, your credit profile, or personalized financial advice.
Sources of Purchasing Power vs. Where It Gets Spent
Car Affordability Calculator Questions Answered
What is the 20/4/10 rule, and does this calculator apply it?
The 20/4/10 rule is a car-buying guideline, documented by lenders such as Chase and Capital One, suggesting a 20% down payment, a loan term of four years or less, and total transportation costs under 10% of gross monthly income. It is not a fixed formula.
Does trade-in value with a remaining loan balance count in full?
If you still owe money on the trade-in, only the equity, the trade-in value minus any loan payoff, actually adds to your purchasing power. Entering the full trade-in value without subtracting an outstanding payoff overstates what you can afford.
What’s a common mistake when entering the interest rate?
Entering the interest rate as a decimal, such as 0.05 instead of 5, is a common mistake; the calculator reads it as 0.05% rather than 5% and returns an inflated affordable price no real lender would approve.
Should my monthly budget include insurance and gas?
The Monthly Budget field represents only the loan payment portion of your transportation costs, not insurance, fuel, or maintenance. Entering your entire transportation budget as the loan payment will overstate the loan amount you can support.
What happens if I enter a 0% interest rate or a 0-month term?
An interest rate of 0% is valid and switches the formula to a simple sum of payments across the term instead of the present-value-of-annuity calculation. A loan term of 0 months is invalid and the calculator will not compute a result.