When you're scrolling through new cars online, it's easy to pick the exact model you want with all of the newest features, only to realize later that your budget might not align with the monthly payment. This can be especially true when you factor in costs like gas, car insurance, maintenance, and repairs.
When you understand the all-in cost of buying a car, it can make it easier to determine how much you can afford to spend, and how big a line item transportation is going to be in your monthly budget.
If you're trying to figure out how much you should spend on your next car, this guide gives you a step-by-step way to do it.
The real cost of car ownership goes way beyond the price tag
A car’s price and your monthly loan payment are only one part of your total cost. And keep in mind your auto loan payment may be higher if you have bad credit.
There are several other factors that contribute to the total cost of car ownership.
- Insurance: Rates vary by age, driving record, and vehicle type, with newer, more expensive cars costing more to insure, especially for younger drivers.
- Gas: Costs rise with driving distance, car size, and gas prices.
- Maintenance and repairs: Oil changes, brakes, tires, and unexpected repairs all go into this category.
- Registration and taxes: Annual fees vary by state, so check your local regulations to confirm the annual cost.
It's also worth noting that your car depreciates in value every year. So if you buy a car for $25,000 today, it might only be worth $20,000 a year from now. This is especially important to know if you take out an auto loan and need to sell the car sooner rather than later.
Once you understand these costs, you’re ready to plan with simple budgeting rules.
Smart budgeting rules that actually work for your paycheck
Now that you know the full cost of owning a car, you can use practical income-based rules to pick a price range that won’t overwhelm your budget.
And if you need extra support, EarnIn can help you plan. Cash Out1 can help you access up to $150/day, with a max of $1,000 per pay period from your already earned pay with no interest and no mandatory fees1 for standard transfers. This can be helpful when timing gaps pop up between paychecks and when your next loan payment is due. You can also test loan terms, interest rates, and payments using EarnIn’s financial calculators2 to feel more confident about your financial numbers before you buy.
H3: Need to access your pay, faster?
H3: Need to access your pay, faster?
You don’t have to wait for your paycheck to use your pay. Use the EarnIn Card to access your pay in real time with Live Pay.3 Get paid up to $1,500 per pay period, (based on eligibility and usage limits).
What makes Live Pay3 different is instead of your earnings updating daily, they are available right on your EarnIn Card, every second of the workday.
The 10–15% rule and why it matters
A common guideline is to keep your total car expenses around 10%–15% of your take-home pay. This includes your payment, gas, insurance, and maintenance. Staying in this range can protect your budget and keep space for savings, emergencies, and other bills.
For example, if you take home $3,000 a month, a safe total car budget is generally between $300–$450. At $4,500 take-home pay, your budget could rise to about $450–$675. This approach keeps your spending predictable and prevents your car spending from taking over your paycheck.
Monthly take-home pay | Suggested total car budget (10–15%) |
$2,500 | $250–$375 |
$3,500 | $350–$525 |
$5,000 | $500–$750 |
This rule won’t fit every situation, but it gives you a strong starting point.
Monthly payment traps to avoid
It’s easy to focus on getting a vehicle with the lowest monthly payment, especially when a dealer stretches your loan to make the payment look more affordable. But a lower payment can hide a much higher total cost.
Longer loans, like a 72-month repayment term, reduce your monthly payment but increase the total interest you’ll pay over the life of the loan. A 60-month loan might cost more each month, but it could save you hundreds or thousands over time.
Here’s an example of what monthly payments and interest might be on a $20,000 loan with 6% interest and no down payment.
Loan term | Monthly payment | Total interest paid |
60 months | $386.66 | $3,199.36 |
72 months | $331.46 | $3,864.96 |
When you look at the total cost instead of only the monthly payment, it can help you make smarter long-term decisions.
Down payment strategies that make sense
A bigger down payment can help lower your monthly costs and reduce the total amount you’ll have to borrow. Many buyers aim for 20% down, but you may be able to mix a trade-in, savings, or cash to get close to that number if you don't have it on hand.
If you want a practical plan, start here:
- Check your current car’s trade-in value, if you have one.
- Set a savings target for the difference between your car's value and the amount you want to put down based on your timeline.
- Try different down payment amounts using EarnIn’s auto loan calculator2.
- Compare how each option changes your monthly and total costs.
A larger down payment can help you stay flexible, but be sure to choose an amount that still leaves room in your budget for daily expenses and savings.
Here’s an example of what monthly payments and interest might be on a $20,000 loan with 6% interest at various down payments.
Down payment | Monthly payment | Total interest |
10% ($2,000) | $298.31 | $3,478.46 |
20% ($4,000) | $265.17 | $3,091.97 |
30% ($6,000) | $232.02 | $2,705.47 |
How EarnIn helps you budget and buy smarter
You want a car you can afford without adding more stress to your paycheck. EarnIn offers tools that help you cover timing gaps, plan your costs, and build confidence before you buy.
With Cash Out1, you can access up to $150 a day, with a max of $1,000 per pay period from your earned pay with no interest1. This can help you handle gas, a repair bill, or a tight week before payday without adding debt or late fees.
EarnIn also offers free financial calculators2 that let you estimate payments, compare loan terms, and understand how interest affects your total cost. You can try different scenarios before you shop, so you don’t walk into a dealership unsure of your numbers.
If you want help setting aside money for maintenance or repairs, you can use Tip Yourself4 to set yourself up to save every time you get paid with a no-cost, FDIC-insured account.
If you’re ready to plan savvy and buy with confidence, download the EarnIn app and start using these tools today.
Making the final decision with confidence
Once you know your budget, you can choose a car that fits your needs without feeling pressured or rushed. These steps help keep your purchase simple and stress-free.
- Get pre-approved. Doing so can set your price range and protect you from high dealer rates.
- Compare listings. Check similar models at multiple dealers and private sellers.
- Look for hidden fees. Ask about documentation fees, warranties, and add-ons.
- Inspect carefully. Look for wear, leaks, or unusual sounds.
- Test drive. Pay attention to brakes, steering, and comfort.
- Negotiate with confidence. Use your research and pre-approval to stick to your budget.
- Review the contract. Make sure the numbers match what you agreed to.
These steps help you protect your wallet and enable you to choose a reliable car you feel good about.
FAQs
How much car can you afford with a $50,000 salary?
If you take home around $3,200 a month, the 10–15% rule puts your total car budget between $320 and $480 a month.
If you take home around $3,200 a month, the 10–15% rule puts your total car budget between $320 and $480 a month.
Should you buy new or used to stay within budget?
Used cars often cost less and avoid early depreciation. New cars sometimes offer better warranties. Ultimately, you'll want to choose a car with an all-in cost, including insurance, gas, loan payment, and maintenance charges, that fits within your budget.
Used cars often cost less and avoid early depreciation. New cars sometimes offer better warranties. Ultimately, you'll want to choose a car with an all-in cost, including insurance, gas, loan payment, and maintenance charges, that fits within your budget.
What’s the best loan term for your budget?
Shorter loan terms may reduce total interest charges, while longer loan terms can mean a smaller monthly payment. Choose the one that fits your monthly cash flow and long-term financial goals.
Shorter loan terms may reduce total interest charges, while longer loan terms can mean a smaller monthly payment. Choose the one that fits your monthly cash flow and long-term financial goals.
How do you factor in maintenance costs?
A simple rule is to set aside $50–$100 each month to cover maintenance costs. Older cars may need more maintenance depending on their condition.
A simple rule is to set aside $50–$100 each month to cover maintenance costs. Older cars may need more maintenance depending on their condition.
When should you replace your current car?
If repairs cost more than the car’s value or it’s no longer reliable for work, it may be time to replace it.
If repairs cost more than the car’s value or it’s no longer reliable for work, it may be time to replace it.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
This Blog was sponsored by EarnIn. While the author received compensation, the information shared is grounded in independent research and intended to provide helpful and accurate guidance to readers.
EarnIn is a financial technology company, not a bank. The Cash Out product is a non‑bank service provided by EarnIn. Certain banking and payment services are provided by Evolve Bank & Trust, Member FDIC, and/or Lead Bank, Member FDIC, as applicable. FDIC insurance applies only to deposits held in insured deposit accounts at an FDIC‑insured bank and protects your deposits in the event of a bank failure, up to at least $250,000 at each FDIC‑insured bank. Learn more at fdic.gov/resources/deposit‑insurance. Additional in‑app services may be provided by third‑party service providers and are subject to their terms and conditions.
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