A car is a depreciating asset. Dealerships and lenders will stretch your budget as far as you let them. This calculator tells you what you can responsibly spend on a vehicle without compromising your ability to save and build wealth.
Payment as % of Take-Home
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Target: under 10%
Total Car Cost as % of Take-Home
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Target: under 15%
Long loan term. Loans over 48 months mean you are paying interest on a depreciating asset for years longer than necessary. You will likely owe more than the car is worth (negative equity) for most of the loan. If you need 60+ months to afford the payment, the car is too expensive.
This car exceeds 35% of your annual gross income. A vehicle worth more than a third of your yearly earnings is a wealth drag. It ties up capital in something that loses value every day. Consider a lower price point or a larger down payment.
Monthly Cost of Ownership
Loan Payment
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Insurance
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Fuel (estimated)
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Maintenance (estimated)
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Total Monthly Car Cost
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True Cost of This Loan
Loan amount
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Total interest paid
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Total paid over loan life
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Estimated value at payoff
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A smarter target
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Keep total car costs (payment + insurance + fuel + maintenance) under 15% of your take-home pay. The number above reflects that limit. Every dollar you don't spend on a car is a dollar that can compound in your investment accounts.
The real cost of a car
A car loses roughly 20% of its value in the first year and about 15% each year after that. If you finance $35,000 over 60 months, by the time it is paid off the car is worth roughly half what you paid. Meanwhile you also paid thousands in interest, insurance, fuel, and maintenance. The wealthiest people I have worked with in 20 years all share one habit: they drive less car than they can afford. That discipline is not about being cheap. It is about keeping capital working for them instead of sitting in a driveway losing value.