People discussing the purchase of a car

How Much Car Can I Really Afford?

Updated December 2, 2020 . AmFam Team

Before you spend your hard-earned cash on a new car, it’s good to know what you can realistically afford.

Got your eye on a brand-new ride? Exciting, isn’t it? Shopping for the vehicle of your dreams can be an exhilarating experience. There’s just something about that new car smell that revs up the engines and puts you in a buying mood. But getting caught up in the moment can make it easy to overspend. So before you fork over your hard-earned cash, take some time to think about what you can realistically afford.

Don’t worry. Budgets don’t have to be a bummer. With a little homework and some basic number crunching, you can get the car you want without emptying your pockets.

Car Affordability Calculator How to Calculate How Much Car You Can Afford

One simple rule you could apply to your car purchase is spend no more than 30% of your annual income on the vehicle of your choosing. This allows your budget to be flexible enough to cover the additional costs of maintenance, insurance and other expenses.

Auto finance calculators (Opens in a new tab) can also come in handy when you have all the budgeting and finance details pretty clear ahead of time. This will help you find an accurate monthly payment given your unique information.

Bottom line: with a basic budget and some smart shopping before you buy, you can save big money down the road. If you’re ready to buy but not quite sure where to start, check out these 9 tips to buying your dream car.

Protect Your New Car with Coverage From American Family Insurance

Want to find the right insurance for your new set of wheels? Your American Family agent (Opens in a new tab) can help you build a policy that fits your budget best.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

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