Calculator: How Much Car Can I Afford?

What Else to Consider When Determining How Much Car You Can Afford

Spending Habits

Buying a car is a long-term financial commitment, so it’s important to consider your spending habits and ensure you’re ready to take on this added expense. Vehicle financing is a great way to spread out the cost of a car over time, but you have to be prepared to meet your monthly payment obligations until the car is paid off (or sold). If you’re worried you won’t be able to consistently make those payments, you might want to continue saving or look into some more affordable options.

Financing Options: Leasing, Buying New, and Buying Used

How much car you can afford can depend on how you choose to finance the vehicle. For example, if you choose to lease a new car rather than buy a new car, your monthly payment for the same vehicle might be significantly less with the lease, though you won’t be any closer to owning the car at the end of your lease term. Similarly, if you buy used, you may be able to use the same payment to buy a car that has a much higher retail price than the new car you could afford.

Leasing, buying used, and buying new all come with their own advantages and disadvantages.

Leasing

Buying New

Buying Used

Maintenance and Repair Costs

Your car, much like your house, is far from a one-time expense. If you want your car to keep working for you, you have to return the favor in the form of repairs and regular maintenance. While you can plan most of your maintenance trips, you can’t necessarily predict when your car will need repairs. Nevertheless, you’ll have to budget for the possibility of pricey repairs if you own a car, and the best way to do that is by working these costs into your monthly car budget.

FYI – Many people want to know if car insurance covers non-accident repairs: the answer is, unfortunately, no.

10 Least Expensive Cars to Maintain 

10 Most Expensive Cars to Maintain 

What should you plan to pay per month for maintenance and repairs?

The type of car you own, where you live, how much you drive, and even your driving habits can impact your car maintenance and repair costs. With that in mind, the average cost of maintenance and repairs nationwide comes out to 9.55 cents per mile, according to AAA. Since the average person drives around 1,200 miles per month, that translates to a monthly cost of $114.60 for maintaining and repairing your car. 

It’s important to note that repair costs can come out of the blue, so don’t be surprised if you’re cruising along with no repair costs one month, only to find yourself at the mechanic with an $800 bill to pay the next. If you take care of your car’s regular maintenance, you should find that your repair most months is relatively inexpensive, but that there will be a few very expensive months every now and again. 

What if you buy an older vehicle?

Again there are no hard-and-fast rules when it comes to maintenance and repair costs, but most older vehicles will incur higher maintenance and repair costs. On average, a 10-year-old car will cost you nearly twice as much to maintain and repair compared with a 5-year-old car. If you own a 2017 model car, that would equate to a car loan budget of $208 per month, whereas a 2012 model would set you back an average of $406 monthly.

Luxury cars also cost more to maintain and repair

If you want to buy a luxury car, you can expect the added comfort and style these cars offer to cost you more, not only when you’re buying, but throughout your time owning the vehicle. For example, BMW, Audi, and Mercedez-Benz sedans generally cost more to maintain and repair than comparable Ford, Nissan, and Toyota models.

So, which one should you choose?

Sometimes, your budget can leave you with few choices, which may mean your only option is to buy an older car. Other times, you might just be looking for a bargain by choosing an older car and the lower price point . Buying an older car might be cheaper initially, but the caveat is that it’ll cost you more in maintenance and repairs, and you might find yourself shopping for another car in the near future if the car breaks down.

If you have the flexibility to choose between a new and used car, it probably makes the most sense to buy a car that’s around 3 -5 years old. Why? Well, you’ll still benefit from getting a more competitive price than if you buy new, and you’ll get a more reliable car than if you buy something that’s 8 or 10 years old. Keep in mind that mileage is also an important factor, so the age of the car may not tell its entire story.

Other Costs to Consider

Before you can use your car, there are a couple of additional costs to consider. 

Gas (or electricity)

Your car needs some type of energy to keep it moving. For most cars on the road today, that means taking a trip to the pump to fill the tank with gas. The cost of gasoline depends on gas prices, how far you drive, and your car’s efficiency. In 2021, the average household was spending about $233 per month (or $2,800) per year on gas; in 2022, that number is closer to $400 per month due to recent increases in gas prices. 
For those with electric vehicles (EVs), you’ll need to charge up the batteries, which costs roughly $6 for a 200-mile charge if you have a charging station at home.

Insurance

By law, you have to maintain car insurance on any vehicle you own that’s registered with the department of motor vehicles. Car insurance costs can vary substantially based on the state you live in, the type of coverage you choose, the car you drive, your age, and of course, your driving record. On average, car insurance will cost you roughly 0 per month. 

Curious to know which states offer the most (and least) affordable car insurance rates? We’ve got you covered.

License, Registration, Inspections, and Parking

You’ll need to maintain a valid driver license (usually less than $10 per month) to legally drive. In addition, you’ll have to register the car with the state’s department of motor vehicles and pay an annual renewal fee, which ranges from less than $50 per year to several hundred dollars for heavier vehicles in certain states. Some states may require vehicle inspections and emission tests, which often cost $40 or $50 per year and up. Finally, if you live in a city, you may have to pay for parking, an expense that could add up to thousands per year.

Other costs to consider include gap insurance and any customizations you want to make to your car.