How much should you spend on a new car? |
Best selling cars at dealership

How much should I spend on a new car?

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

Learn how to find a car in your price range.

Cars can get expensive. When you can pay it in installments the difference between a used 2002 Honda and a brand new Benz might not seem like that big of a deal — especially if you stretch out the term long enough. But buying within your price range can help you stay financially healthy.

How much can I afford to spend on a new car?

The amount you should spend on a new car largely comes down to your finances and your personal tastes, but a suggested range is around 10% to 15% of your annual income. If you’re a car enthusiast or are in your car a lot , you might push the limits and spend 15% to 30% of your income.

Why 10% to 15%?

  • Keeps you from borrowing more than you need. The more you borrow, the more you pay inn interest
  • Leaves room for the cost of owning a car. Between insurance, gas, maintenance and repairs, the ongoing costs of owning a car add up quickly.
  • Car value depreciates rapidly. Think of your car as a useful tool, not as an investment. You don’t want to pay for something not worth what you’ve invested in it.

Calculate how much you should borrow

Use this calculator to find out what car loan amounts and terms you can afford for a new car.

Compare car loans from top providers

Rates last updated March 19th, 2019

Reveal your potential loan offers and rates

Answer two quick questions to filter the loan offers and get the best one for you.

Select your credit score range

I don't know my credit score

Finally, select where you live.

To get your credit score:

Experian logo

Experian is a leading provider of personal and business credit reporting. Find out your FICO score now for less than the cost of a cup of coffee.

Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
Name Product Product Description Min. Credit Score Term of Loan Requirements Car Loans
Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
Varies by lender
Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
Auto Credit Express Car Loans
Get connected with an auto lender near you, even if you have bad credit.
Typically 3 to 6 years
Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
LightStream Auto Loans
Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
Good to excellent credit
Flexible terms
Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
LendingClub Auto Refinancing
Lower your monthly car payments and save on interest through a fast and easy online application process.
Fair or better credit
Minimum of 2 years
Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
RateGenius Auto Loan Refinance
Connect with a network of over 150 lenders to refinance your car loan.
Income of $2,000+/month, vehicle has less than 150,000 miles and is no older than 8 years, loan balance is between $10,000 and $100,000, debt-to-income ratio is less than 50%
LendingTree Auto Loans
Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
Good to excellent credit
Typically 1 to 7 years
Must be a US citizen and 18+ years old. Must have good to excellent credit.

Compare up to 4 providers

Buying a car for less than $3,000

  • There are thousands of used cars being sold for less than $3,000. Check eBay, Craigslist, the local classifieds, used car dealerships and online auctions.
  • Know what to look for in a used car. By following a checklist and knowing what to be aware of, you ccould avoid purchasing a lemon.
  • Consider financing rather than leasing if it helps you get a more reliable or efficient vehicle, or if you’re caught short and urgently need a new car to get to work. Specialized used car loans let you borrow as little as $1,000 with fixed interest rates starting at 5.69%.
  • You may not want comprehensive car insurance for a vehicle under $3,000, even if you’re the kind of person who gives your car a name and emotionally bonds with it. Consider sticking to third party property damage only. This is one of the cheapest types of car insurance, but it still offers minimal protection.

Buying a car for less than $15,000:

  • You can find recent-model used cars online for $10,000 or less.
  • Car loans are available for higher amounts, and you’ll be able to find a cheaper rate if you can use your car as collateral.
  • Vehicle auctions are popular among car dealers. This is where a lot of them go to pick up a bargain for resale at a higher price. . Learn about car auction etiquette and you can beat them to the punch, picking up exfleet and government vehicles at a fraction of their value.
  • You could save money by opting for a more recent or popular model, even if it costs a little bit more. Spare parts are easier to find, so it can keep repair, maintenance and car insurance costs down.
  • Comprehensive car insurance may not deliver value for money in this price range. Consider third party property damage insurance for important but inexpensive coverage, or third party fire and theft insurance, which covers legal liability as well as theft and fire damage, while still being relatively affordable.

Buying a car for $15,000 or more:

  • Used vehicles can be a good choice for every budget, including those in higher price ranges. Look around and you might find current-model cars in almost pristine condition for half of what they cost new.
  • If you’re planning on financing your vehicle, it’s could lower your rates to use your car as security when taking out a higher loan amount. Used cars can still be used as security, but you might find that new car loans have a cheaper rate.
  • Vehicles in this price range and above can be loaded with additional features and electronics. If you want to save money, look for the features that deliver value and safety, rather than the luxuries, cosmetic features or unneeded conveniences.
  • If you want to get a lot of use out of your car and plan on treating it like your own child, comprehensive car insurance can deliver a high level of protection.

Bottom line

Remember that everyone’s financial situation is different. Compare every option critically before deciding on a loan. You can compare all your car loan options here.

Frequently asked questions

Image source: Shutterstock

Elizabeth Barry

Elizabeth Barry is Finder's global fintech editor. She has written about finance for over five years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at The Lizzies. Elizabeth has found writing about innovations in financial services to be her passion (which has surprised no one more than herself).

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site