Car Affordability Calculator — How Much Car Can You Afford?
Enter your monthly income, deposit, trade-in, and an interest rate. CalcWize applies the 20/4/10 rule of thumb — 20% down, no more than a 4-year loan, and total car costs (payment plus running costs) under 10% of gross income — and works back to the maximum car price that keeps you comfortably inside it.
When this is useful
Before you walk onto a forecourt or click "apply for finance". The dealer will tell you the biggest payment you qualify for; this tells you the price that actually fits your life. Set your price band first, then shop inside it.
The 20/4/10 rule
A simple guardrail: put at least 20% down, finance for no more than 4 years, and keep total transport costs — loan payment, fuel, insurance, maintenance — under 10% of gross income. The 20% down keeps you from going underwater, the 4-year cap limits interest, and the 10% leaves room for the rest of your budget.
Why running costs belong in the budget
A car payment is only part of the bill. Fuel, insurance, servicing, and registration can add hundreds a month. The calculator subtracts your running-cost estimate from the budget first, so the loan payment it leaves you is one you can genuinely sustain — not just one a lender will approve.
A worked example
On $5,000 gross monthly income, 10% is a $500 transport budget. If running costs are $350 a month, only $150 is left for the loan payment — which at 8% over 4 years supports roughly $6,100 of loan. Add a $3,000 deposit and you are shopping around $9,000, not the $25,000 a lender might wave through. That gap is the entire point of the rule.
Common mistakes
Stretching the loan to 6 or 7 years to afford a pricier car — you pay far more interest and stay underwater for years. Forgetting insurance and fuel in the budget. And treating the lender’s maximum as a target rather than a ceiling. Borrow for the car you need, not the most the bank will lend.
Frequently asked questions
- Why only 10% of income?
- The 20/4/10 rule keeps total transport costs — loan, fuel, insurance, maintenance — to about a tenth of gross income so a car doesn’t crowd out rent, savings, and everything else. It’s a guardrail, not a law; adjust it to your situation, but treat a higher figure as a stretch.
- Should I really put 20% down?
- A deposit of around 20% means you’re not immediately underwater (owing more than the car is worth) as it depreciates in the first year. With little or nothing down, a write-off or early sale can leave you owing money on a car you no longer have.
- Why cap the loan at 4 years?
- Longer loans lower the monthly payment but pile on interest and keep you underwater for years. Four years balances an affordable payment against a sane total cost. If you need 6 or 7 years to afford a car, that’s usually a sign to buy a cheaper one.
How we calculate it
Your transport budget is gross monthly income × the budget percentage (10% in the 20/4/10 rule). Running costs are subtracted to leave a maximum loan payment, which is converted to a loan amount with the standard annuity formula. Adding your deposit and trade-in gives the maximum car price.
What it doesn't do
- The exact finance offer (use the Auto Loan calculator for payment detail)
- Lease deals (use the Lease vs Buy calculator)
- Total running cost over time (use the Cost of Ownership calculator)
Last reviewed: 2026-05