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Salesmen explaining how much you should spend on a car
How much should you spend on a car?

Buying a vehicle can be one of the most costly expenses for households, and with the average monthly car payment for a new vehicle in the U.S at $523 a month, cars aren’t getting any cheaper.[1] On the contrary, the median household income in the United States was only $62,175 as of June 2018.[2]  Based on this information alone, many Americans are unable to afford the average cost of a new vehicle.[3]

So, how do you avoid overspending on a vehicle?

In this article you’ll discover techniques and guidelines to help you establish benchmarks for your auto payments and strategies to find a car you can afford.

How much car can you afford?

To ensure you are making the best financial decision when it comes to purchasing a new vehicle, we recommend following a few simple guidelines and rules.  After all, everyone’s lifestyle and saving habits are different.

Map out your Expenses

Estimating your auto budget depends on multiple factors with the main one being your total monthly expenses. Which may include your mortgage, student loans, personal loans, rent, cable bills, daycare, and more.

Mapping out your expenses allows you to visually see the amount of disposable income you have. This will help you determine how much you can afford to allocate towards a monthly car payment.

Anticipate Your New Expenses

You should predict any additional expense you could incur as a result of purchasing a new or used car. This might include car insurances, monthly maintenance, and more. You want to have an idea of how these new expenses could impact your budget and savings.

Figure out your ideal monthly car payment

Your monthly car payment can be impacted by many factors. These factors include the initial down payment, trade-in value of current vehicle, state sales taxes, interest rates, your credit score and more. All these factors could influence how much you have to pay for a car upfront and may impact your monthly payments.

When trying to determine what your ideal monthly car payment amount should be, the auto affordability calculator is a great tool to use. This valuable and FREE resource will help keep you within your budget.

After mapping out your current expenses, anticipating new expenses and determining your ideal monthly payment, you can now compare your budget with some general car buying guidelines.

Here are a few common vetted budgeting tips for purchasing a vehicle:

  1.  The 20/4/10 Rule: You should put 20% on a down payment for your auto loan while financing the car for a loan term of no more than 4 years. You should also make sure your monthly payment is under 10% of your salary*.*Note this includes principle interest on the loan and car insurance expenses.
  2. The 36% rule: Unlike the 20/4/10 rule, this rule encompasses any of your loan payments. When utilizing this principle, your total loan payments should be no more than 36% of your salary. This includes your mortgage, car loan, personal loans, student loans and credit card minimum payments.After adding up all of your debt you can see how much you have left for your car budget.
  3. The 20% Rule: This rule encourages you not to spend more than 20% of your annual salary on a car.

It’s important to know how much you should spend on your car. Especially since a car can be one of the most expensive purchases in a household. Hopefully these tips help you come up with a good game plan and a solid framework for evaluating how much you should spend on your car.

Looking for a car? Check out our article 2019 Best Used Cars to Buy Under $15,000.

Need an auto loan for your next vehicle purchase? Check out Mariner Finances car loans.




Blog posts are for informational purposes only.

†We offer personal loans from $1,000 to $25,000, with loans terms from 12 to 60 months. Minimum and maximum amounts dependent on an applicant’s state of residence and the underwriting of the loan. Loans between $1,500 and $15,000 may be funded online. Loans greater than $15,000 or less than $1,500 are funded through our branch network. Specific interest rates and fees are determined as permitted under applicable state law and depend upon loan amount, term, and the applicant’s ability to meet our credit criteria, including, but not limited to, credit history, income, debt payment obligations, and other factors such as availability of collateral. Not all rates and loan amounts are available in all states. Additional fees may apply to some loan offers; some state required and/or permitted fees may be treated as prepaid finance charges. Any such charges shall be in addition to the loan amount requested and/or approved and shall be fully disclosed to the applicant on his/her loan agreement. Not all applicants will qualify for the lowest rates or larger loan amounts, which may require a first lien on a motor vehicle not more than ten years old titled in the applicant’s name with valid insurance. Our loan by phone and online closing process requires a compatible mobile or computer device on which you can access your email and electronic documents. Not all loan types are eligible for loan by phone or online loan closing.


To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. As a result, under our customer identification program, we must ask for your name, street address, mailing address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents.


For any stated annual percentage rate (“APR”), the APR represents the cost of credit as a yearly rate and will be determined based upon an applicant’s credit at the time of application, subject to state law limits. A range of APR’s may be applicable, subject to state law limits and individual underwriting. Not all applicants will qualify for a lower rate. APR’s are generally higher on loans not secured by a vehicle, and the lowest rates typically apply to the most creditworthy borrowers. All terms and conditions of a loan offer, including the APR, will be disclosed during the application process. As an example, with an amount financed of $5,000.00 the borrower receives $5,000.00 at an APR of 29.99% and an interest rate of 28.77% which includes a finance charge of $3,640.96. Under these terms, the borrower would make 48 monthly payments of $180.02, for a total of payments of $8,640.96. The amount financed may not be the net proceeds paid if charges other than interest are included in the loan.


*The process uses a “soft” credit inquiry to determine whether a loan offer is available, which does not impact your credit score. If you continue with the application process online and accept a loan offer, or are referred to a branch and continue your application there, we will pull your credit report and credit score again using a “hard” credit inquiry. This “hard” credit inquiry may impact your credit score.



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