Car Payment Calculator

The 20/4/10 rule is a quick affordability test popularized by personal finance writers like Dave Ramsey and Clark Howard. Put at least 20% down, take a loan no longer than 4 years (48 months), and keep your total transportation payments (loan plus other car debt) at or under 10% of your gross monthly income. A buyer earning $75,000 a year ($6,250 per month) should keep car payments at or below $625, finance no more than 80% of the price, and stay inside a 48-month term. Hitting all three is a strong signal you can afford the vehicle without crowding out savings or other goals.

Longer terms lower the payment but raise total interest and can extend the period in which you owe more than the vehicle is worth. On a $30,000 loan at 7 percent APR, the payment is about $594 for 60 months and $511 for 72 months. Total interest is about $5,642 and $6,826, respectively. Compare total cost and expected vehicle value, not only the monthly payment.

Industry data from sources like Kelley Blue Book and Edmunds shows a typical new car loses about 20% of its value in the first 12 months and 50 to 60% over five years. A $35,000 car is worth roughly $28,000 after one year, regardless of how much you have paid down on the loan. That is why putting little or nothing down on a long-term loan often leaves you underwater by month 12. The calculator flags this risk by comparing your loan balance after one year against the car's expected value after the standard 20% first-year depreciation hit.

An 84-month term can make the payment look affordable while increasing interest and negative-equity risk. On a $35,000 loan at 8 percent APR, the payment is about $546 for 84 months versus $710 for 60 months. Total interest is about $10,823 versus $7,580. Whether the loan is unsuitable depends on your budget and vehicle plans, but the longer term does not make the car itself cheaper.

A trade-in reduces the amount financed. This calculator also subtracts the trade-in before applying sales tax, which models a state that grants the full trade-in credit. State and local rules vary by transaction and can tax a different base, so verify the treatment with the state revenue or motor-vehicle agency.