David is a Chartered Financial Analyst with 15 years of experience in consumer lending and auto finance analysis.
This 4-in-1 Car Affordability calculator helps you determine a safe monthly car payment. Enter any three variables—Monthly Income, Existing Debt, Target DTI Ratio, or Affordable Car Payment—to solve for the fourth.
Car Affordability Calculator
Car Affordability Formulas (DTI)
M = (I * (R / 100)) – D
Solve for Income (I):
I = (M + D) / (R / 100)
Solve for Debt (D):
D = (I * (R / 100)) – M
Solve for DTI Ratio (R):
R = ((M + D) / I) * 100
Formula Variables
- (I) Gross Monthly Income: Your total monthly income before taxes and deductions.
- (D) Existing Monthly Debt: Your other monthly debt payments (e.g., rent, mortgage, student loans, credit cards).
- (R) Target DTI Ratio (%): The percentage of your income you’re willing to spend on *total* debt (including the new car). Lenders prefer this under 36-40%.
- (M) Affordable Car Payment: The monthly car payment (principal & interest) that fits within your DTI target.
Related Calculators
- Auto Loan Calculator
- Used Car Loan Calculator
- Debt to Income (DTI) Calculator
- Loan Affordability Calculator
What is Car Affordability?
Car affordability isn’t just about whether you can get approved for a loan; it’s about how much car payment you can *comfortably* afford without straining your budget. The biggest mistake buyers make is focusing only on the monthly payment, not the total cost or its impact on their overall financial health.
Lenders use a metric called the **Debt-to-Income (DTI) Ratio** to determine how much you can afford. This is the percentage of your gross monthly income that goes toward all your monthly debt payments. Most lenders prefer a total DTI (including your new car loan) to be under 40%.
This calculator helps you work backward. You can set a safe DTI ratio for yourself (e.g., 36%) to see what your maximum monthly car payment should be. This gives you a hard limit *before* you start shopping, empowering you to negotiate based on the total price of the car, not just a low monthly payment that might be attached to a dangerously long loan term.
How to Calculate Your Affordable Car Payment (Example)
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Identify Your Finances
Your gross monthly income (I) is $6,000. Your existing monthly debts (D) (rent + student loan) are $1,500. You want to keep your total DTI ratio (R) at or below 36%.
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Calculate Total Debt Allowed
First, find the total dollar amount your DTI ratio allows for *all* debts: $6,000 (Income) * (36 / 100) (DTI) = $2,160
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Apply the Affordability Formula
Subtract your existing debts from your total allowed debt to find the room for a car payment (M).
Formula: M = (I * (R / 100)) – D -
Calculate the Payment
M = ($6,000 * (36 / 100)) – $1,500
M = $2,160 – $1,500
M = $660 -
Final Result
Your affordable monthly car payment (M) is $660. You can now use our Auto Loan Calculator to see what loan amount this payment gets you.
Frequently Asked Questions (FAQ)
Lenders look at your *total* DTI. While some may approve you up to 45% or 50%, a healthy target is 36% or less. Many financial experts recommend an even lower “car-only” rule, like the 20/4/10 rule: 20% down, a loan term of 4 years or less, and total car costs (payment, insurance, gas) not exceeding 10% of your income.
Should I include my rent or mortgage in ‘Existing Monthly Debt’?Yes, absolutely. Lenders look at all your major financial obligations. Include your rent/mortgage, minimum credit card payments, student loans, personal loans, and any other debt that appears on your credit report.
What if I have no other debts?That’s great! Just enter “0” for “Existing Monthly Debt (D)”. The calculator will then show you the full payment allowed by your income and target DTI ratio. For example, $6,000 income at 36% DTI would mean you could (in theory) afford a $2,160 car payment, which is not recommended!
How much income do I need for a specific car payment?You can use this calculator to find out. Enter your Existing Debt (D), your desired car payment (M), and a safe DTI Ratio (R) (e.g., 36%). Leave the “Gross Monthly Income (I)” field blank and click “Calculate.” The result will show you the minimum income you need to afford that payment.