How to Calculate How Much You Can Afford to Pay for a Car
If you want to attempt a rough estimate of how much you can afford to pay for a car, the basic calculations are listed here, simply fill in the blanks.
How Much Can You Afford To Pay For a Car?
Amount
Your Monthly Income Before Taxes _____
Less: Federal Taxes (18%) _____
Less: State and Local Taxes (9.35% of Federal Taxes) _____
Less: FICA Tax (7.65%) _____
= Net Monthly Income _____
Less: Monthly Rent or Mortgage Payment _____
Less: Monthly Student Loan Payments _____
Less: Monthly Credit Card Payments _____
Less: All Other Monthly Loan Payment Obligations _____
Less: 20% of Your Monthly Income Before Taxes for All Other Life Expenses
including food, utilities, entertainment, insurance etc. _____
= Sub-Total _____
x [50]3 _____
Plus Amount of Down Payment Available _____
= Amount You Can Afford to Pay for a Car With a [60] Month Loan _____
Following is an example of the above calculations for a person who makes $30,000 per year, pays
$500 rent, pays $200 in student loan payments, pays $100 in credit card payments, and $150 in
payments on her vehicle loan:
Your Monthly Income Before Taxes $2,500.00
Less: Federal Taxes (18%) 450.00
Less: State and Local Taxes (9.35% of Federal Taxes) 233.75
Less: FICA Tax (7.65%) 191.25
= Net Monthly Income 1625.00
Less: Monthly Rent or Mortgage Payment 500.00
Less: Monthly Student Loan Payments 200.00
Less: Monthly Credit Card Payments 100.00
Less: All Other Monthly Loan Payment Obligations 150.00
Less: 20% of Your Monthly Income Before Taxes for All Other Life Expenses
including food, utilities, entertainment, insurance, etc. 500.00
= Sub-total 175.00
Sub-total x [50]5 8,750
Plus Amount of Down Payment Available 1,250
= Amount He Can Afford to Pay for a Car With a [60] Month Loan $10,000
Of course this is an example and your specific details will differ. However it is a good way to sort out how much of your income goes toward car payments and how much of a auto loan you can comfortably afford.
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