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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.
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.
Consider three main factors when deciding how much you should borrow on your car loan: down payment, loan term and vehicle expenses.
You can use the calculator below to find out what car loan amounts and terms you could afford for a new car.
By deciding ahead of time that you won’t spend more than 15% of your yearly income on a car, you’ll have a clear price in mind when starting your search.
Annual income | How much you should spend on a car (15%) |
---|---|
$20,000 | $3,000 |
$40,000 | $6,000 |
$60,000 | $9,000 |
$80,000 | $12,000 |
$100,000 | $15,000 |
$150,000 | $22,500 |
$200,000 | $30,000 |
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.
Image source: Shutterstock
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