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How much can I afford to borrow for a car or auto loan?

Figuring out how much you need to borrow for an auto loan starts with weighing all the potential costs associated with car ownership and how much you can comfortably afford.

When shopping for a car, it’s tempting to calculate your monthly payment based on the list price of the vehicle. However, this doesn’t take into consideration the other factors that impact your overall loan amount and monthly payment. There are also the longer-term costs of owning and operating a vehicle, such as regular maintenance, gas, and car insurance.

Start calculating the potential costs

To find the true cost of a car or vehicle, add together the up-front cost of the car and features plus monthly expenses, such as interest, insurance, and routine maintenance. Then, subtract factors that may reduce how much you need to borrow, including a trade-in or down payment.

Up-front costs that could add to your total loan amount:

Factors that could reduce the overall cost of your loan:

Other factors that influence how much you’ll pay over the life of your loan:

  • Interest rate
  • Length of the loan

Another important way to reduce your overall costs is to shop around with different lenders so you can compare interest rates and loan terms, which could save you thousands of dollars over the life of your loan.

Use this worksheet to help calculate and compare costs for your new car

Create a monthly spending plan

Next, you want to have a sense for your budget – how much is coming in and going out every month – to figure out how much you can comfortably afford. If you’re not sure how to create your own budget, you can get help from a nonprofit financial counselor .

Monthly expenses generally include:

  • Housing expenses, including utilities
  • Food expenses
  • Transportation costs
  • Personal and family costs

Monthly income includes:

  • Salary paychecks
  • Any other income sources, including child support

Download our budgeting worksheet

Know before you shop

There are several important financial decisions to make before you shop for a car. Learn what questions to ask so you can make the best choice for you.

What you need to know before you shop for a car or auto loan