Score: 4.1/5 (36 votes)

**$650 to More Than $700** Is Now Average for Monthly Car Payment. The pandemic and resulting supply-chain issues, inflation, rising interest rates all play a part. By Sebastian Blanco. Jun 19, 2022. Spencer PlattGetty Images.

According to experts, a car payment is too high if the car payment is **more than 30% of your total income**. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

Financial experts recommend spending no more than about **10% to 15% of your monthly take-home pay** on an auto loan payment. These percentages do not factor in total car expenses, including gas, insurance, repairs and maintenance costs.

Experts say your total car expenses, including monthly payments, insurance, gas and maintenance, should be about 20 percent of your take-home monthly pay. For non-math wizards, like me – Let's say your monthly paycheck is $4,000. Then **a safe estimate for car expenses is $800 per month**.

**The average new car payment in America has crept above the $500 per month mark for the fist time, settling in at $503**, according to a recent study by Experian. And if that weren't bad enough, the average length of a car loan now stands at 68 months.

For $40,000 loans, monthly payments averagely range **between $900 and $1,000**, depending on the interest rate and loan term.

To find out how much car you can afford with this 36% rule, simply **multiply your family's income by 0.36**. So if you earn $100,000, for example, you could afford to take out a car loan of up to $36,000 — assuming you don't have any other debt.

With a loan amount of $30,000, an interest rate of 8%, and a loan repayment period of 60-months, your monthly payment is **around $700**. Before you purchase your new vehicle, remember to budget for car maintenance, gas, and car insurance.

Whether you're paying cash, leasing, or financing a car, **your upper spending limit really shouldn't be a penny more than 35% of your gross annual income**. That means if you make $36,000 a year, the car price shouldn't exceed $12,600.

**The average monthly car payment for new cars is $648**. The average monthly car payment for used cars is $503. 41.02 percent of consumers financed new vehicles in Q1 of 2022.

Expert estimates range broadly. Greg McBride, a senior vice president, chief financial analyst at Bankrate.com, advises that a car payment should equal **no more than 15 percent of your pretax monthly pay**. That means that if you make $50,000 a year, your monthly car payment could be as much as $625.

It's typically recommended that you buy a car worth no more than 35% of your gross annual income— so if you make $60k per year, you can afford a new car that is worth **$21,000 or less**.

How much car can I afford if I make $50,000? While it depends on factors like your credit score, loan terms, down payment and any potential trade-in value, you may find that a vehicle in the **$20,000 to $35,000 range will fit your budget**.

When browsing your options, keep in mind that financial experts will typically tell you to spend less than 10% of your monthly take-home pay on your car payment. That means **if your take-home pay is $3,000 a month, plan to spend no more than $300 on your car payment**.

Average monthly car payment

By the beginning of 2022, the U.S. saw the nationwide average car payment reach **$648** for new vehicles. This was a 12.31% increase from the previous year — and it will likely continue to inflate further due to rising average car prices and the overall rise of inflation.

How much should you spend on a car? If you're taking out a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. **If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600**.

Finding the right car payment

If you take your annual income of $75,000 and divide it by 12 to get your monthly income, you'll come to $6,250. Now multiply that by 10% to get $625, as per the rule stated above. From this math, **you shouldn't spend more than $625 on your monthly car note**.

**Paying off your car early eliminates your auto loan from the equation**. Your DTI will naturally be lower, which opens you up for other forms of credit. It also helps improve your chances of refinancing other loans or consolidating credit card debt at a lower rate.

If you make the median per capita income of about $42,000 a year, for example, you should limit your budget to **$4,200**.

For instance, using our loan calculator, if you buy a $20,000 vehicle at 5% APR for 60 months the **monthly payment would be $377.42** and you would pay $2,645.48 in interest.

**A 720 is a good score**, but you might save money if you improve your credit before you apply for a car loan. If you're shopping for a car loan with a credit score of 720 or higher, you're in a strong position. A 720 credit score is considered good by just about every lender.

The frugal rule: **10% of your income**

If you earn $80,000, that's a used car for around $10,000 or $12,000.

So, theoretically, if your salary is $50,000 you could afford a car payment of $430 or less. With a $100,000 salary, you could afford a mortgage payment of **no more than $2,500**. For those with a salary near $30,000 your home, car, and debt combine should be no more than $1,250 per month.

Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have **72 monthly payments of $310.54 each** and an annual percentage rate (APR) of 3.74%.