Is $300 a good car payment?
NerdWallet recommends spending no more than 10% of your take-home pay on your monthly auto loan payment. So if your after-tax pay each month is $3,000, you could afford a $300 car payment.
Generally, however, a car payment is considered high if it exceeds 10-15% of a person's gross monthly income. This means that if a person earns $3,000 per month, a car payment that is greater than $300-$450 per month may be considered high.
How much should you spend on a car? If you're taking out a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.
In general, experts recommend spending 10%–15% of your income on transportation, including car payment, insurance, and fuel. For example, if your take-home pay is $4,000 per month, then you should spend $400 to $600 on transportation. To be sure, that range is simply for guidance.
Depending on your credit score, you're looking at a quality used vehicle between $8,000 and $12,000.
Your salary is the primary factor in determining which auto loan is best for you. Edmunds recommends that a new car payment be no more than 15 percent of your monthly take-home pay. A used car payment should be no more than 10 percent, but that number varies by expert.
You might find your car payment is too high for a variety of reasons: Maybe you financed your car at the dealership and now realize you could have qualified for a loan with a lower rate and payment. Perhaps you bought a more expensive car than you could realistically afford.
Auto loan interest rates increased in October in response to the higher rates from the Fed, KBB reports. The combination of high interest rates and high prices is making it harder for Americans to afford to drive, Jonathan Smoke, chief economist at KBB parent company Cox Automotive, said in the report.
Generally, yes, a 72 month car loan is bad. When you get a 72 month car loan, you're more likely to go upside down on your car loan, which leaves you in a vulnerable financial position. Avoid getting a 72 month car loan if you can. This might mean getting a cheaper car than you hoped for.
The result is that the car will be a lot more expensive in the end. In the example we've given, a car payment of $400 per month for five years (60 months) equates to $24,000. But the same $400 per month spread out over six years (72 months) is $28,800, while it's $33,600 over seven years (84 months).
How much should I spend on a car if I make $60000?
How much should I spend on a car if I make $60,000? If your take-home pay is $60,000 per year, you should pay no more than $750 per month for a car, which totals 15% of your monthly take-home pay.
Using an average interest rate, and a car payment calculator, you can afford a $19,000-20,000 car on a $70k salary using the 20/4/20 rule of car buying.
Car payment statistics
The average monthly car payment for new cars is $716. The average monthly car payment for used cars is $526. 39.5 percent of vehicles financed in the fourth quarter of 2022 were new vehicles. 60.5 of percent of vehicles financed in the fourth quarter of 2022 were new vehicles.
If you take a car loan of $40000 at an interest rate of 4.12% for a loan term of 72 months, then using an auto loan calculator, you can find that your monthly payment should be $628.
Follow the 35% rule
Whether you're paying cash, leasing, or financing a car, your upper spending limit really shouldn't be a penny more than 35% of your gross annual income. That means if you make $36,000 a year, the car price shouldn't exceed $12,600. Make $60,000, and the car price should fall below $21,000.
| Annual salary (pre-tax) | Estimated monthly car payment should not exceed |
|---|---|
| $75,000 | $625 per month |
| $100,000 | $833 per month |
| $125,000 | $1,042 per month |
| $150,000 | $1,250 per month |
The monthly payment on a $20000 car loan depends mainly on the loan term or the time taken for repayment and APR (Annual Percentage Rate). For example, if the loan term is 36 months and the APR is 4.12%, then the monthly payment will be around $591. If the loan term is 48 months, the monthly payment decreases to $452.
Know Your Expenses
Expert estimates range broadly. Greg McBride, a senior vice president, chief financial analyst at Bankrate.com, advises that a car payment should equal no more than 15 percent of your pretax monthly pay. That means that if you make $50,000 a year, your monthly car payment could be as much as $625.
According to Cox Automotive, the estimated typical monthly new car payment was $780 in January 2023. When you're buying a car, it's helpful to use the average car payment amount as a benchmark, but your actual car payment is determined by several different factors.
In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate. If you have poorer credit, you can still get a loan, but you will probably have to pay more for it or else find a co-signer.
Is it smart to have a car payment?
Financing a car may be a good idea when: You want to drive a newer car you'd be unable to save up enough cash for in a reasonable amount of time. The interest rate is low, so the extra costs won't add much to the overall cost of the vehicle. The regular payments won't add stress to your current or upcoming budget.
- Compare multiple loan offers. Financing your purchase through the dealership is easy, convenient, and quicker than shopping around for other offers, but it may not be your best bet. ...
- Buy a lower-priced vehicle. ...
- Improve your credit. ...
- Make a larger down payment. ...
- Extend your loan term.
- Consider refinancing your car loan. ...
- Work with your current auto loan provider. ...
- Work on building your credit. ...
- Trade in your car for a lower-priced vehicle. ...
- Sell your vehicle to someone else. ...
- Lease a car instead of buying it outright.
- Renegotiate your loan terms. Lenders often allow you to defer a payment when you're facing financial hardship. ...
- Refinance your car loan. There are two ways refinancing your car loan can help lower your monthly payment. ...
- Sell or trade in your car. ...
- Make extra payments when possible.
The average monthly payment for a new vehicle hit a record $730 in the first quarter, up from $656 in 2022. And 16.8 percent, or about 1 in 6 of them, are paying $1,000 or more a month — also a new all-time high.
Paying extra payments toward the principal in your car loan will shorten the overall length of your loan. While you'll be paying more every month, you'll be paying the loan back for fewer months total. You'll also build equity much faster.
- Make a full lump sum payment. ...
- Make a partial lump sum payment. ...
- Make extra payments each month. ...
- Make larger payments each month. ...
- Request extra or larger payments to go toward your principal.
For one thing, with seven-year or sometimes even eight-year loans, "you're going to pay an enormous amount of money in interest," he says. Longer-term loans usually have higher interest rates — and you're paying longer, he says.
| Lender | Starting APR | Award |
|---|---|---|
| 1. MyAutoloan | 5.04% for 72-month auto loans | Best Low-Rate Option |
| 2. Autopay | 2.99%* | Most Well-Rounded |
| 3. Consumers Credit Union | 5.64% for 72-month loans | Most Flexible Terms |
| 4. PenFed Credit Union | 5.84% for 72-month loans | Most Cohesive Process |
If you have been qualified for a $30,000 car loan, the monthly payment depends on the amount of the down payment, interest rate, and loan length. For example, with a down payment of $2,500, an interest rate of 5%, and a loan length of three years, you will have to pay $824.20/month.
How much is a $30,000 dollar car monthly payment?
The monthly car payments on a $30K car loan range from $505.94 to $834.15.
With a loan amount of $30,000, an interest rate of 8%, and a loan repayment period of 60-months, your monthly payment is around $700. Before you purchase your new vehicle, remember to budget for car maintenance, gas, and car insurance.
It's typically recommended that you buy a car worth no more than 35% of your gross annual income— so if you make $60k per year, you can afford a new car that is worth $21,000 or less.
Most of the millionaires surveyed said they never spent more than $65,000 on an automobile. Over 50 percent of these cars are American made with 3 in 10 millionaires driving a Ford F-150 pickup.
- 2019 Ford Fiesta. Starting MSRP: $14,260. ...
- 2019 Chevrolet Cruze. Starting MSRP: $17,995. ...
- 2019 Nissan Frontier. Starting MSRP: $18,990. ...
- 2019 Honda Civic. Starting MSRP: $19,450. ...
- 2019 Fiat 500. Starting MSRP: $21,910. ...
- 2019 Ford Fusion S. Starting MSRP: $22,840. ...
- 2019 Honda Insight. Starting MSRP: $22,930. ...
- 2019 Chevrolet Malibu.
While the number of auto loans has risen by roughly 29% over the last decade — from 81.75 million in the third quarter of 2012 to 105.33 million in the third quarter of 2022 — auto loans peaked at 116.43 million loans in the first quarter of 2020.
The short version is that it recommends making a 20% down payment on the car, taking four years to return the money to the lender, and keeping transportation costs just under 10% of your monthly income.
Finding the right car payment
If you take your annual income of $75,000 and divide it by 12 to get your monthly income, you'll come to $6,250. Now multiply that by 10% to get $625, as per the rule stated above. From this math, you shouldn't spend more than $625 on your monthly car note.
“The transaction data from February indicates that prices continue a downward trend at the beginning of 2023,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive.
When it comes to how long it takes to pay off a car loan, the most common loan term is currently 72 months, followed by 84-month terms. So if you're one of the 70% of car owners with a term of 60 months or longer, you're far from alone.
What percentage of people pay cash for a new car?
This is double the amount of loan debt 10 years ago, and it's only expected to increase in the future along with rising auto prices. While half of respondents financed, a significant portion of Americans (38%) purchased their most recent vehicle in cash.
Follow the 35% rule
Whether you're paying cash, leasing, or financing a car, your upper spending limit really shouldn't be a penny more than 35% of your gross annual income. That means if you make $36,000 a year, the car price shouldn't exceed $12,600.
A good rule of thumb for a down payment on a new car loan is 20% of the purchase price. A down payment of 20% or more is a way to avoid being “upside down” on your car loan (owing more on the car than it's worth).
