How Much Car Can I Afford? | Dick Hannah Dealerships

How Much Car Can I Afford?

Everyone’s personal financial situation is different. When you understand how much car you can afford, and identify the vehicles that fall within your price range, the car-buying experience is fun and exciting. When shopping for a vehicle, it’s not always easy to tell what you can afford until you calculate the monthly payment. This is the number that will impact your day-to-day budget the most.

With interest rates at an all-time low right now, people are finding they can afford MORE car than they may have thought. Maybe a larger vehicle. More bells and whistles. Additional accessories. For most, it’s the monthly payment that is key, not the sticker price.

This article serves as a guide to help you calculate which vehicles and monthly car payments will work with your monthly budget. So now it’s time to ask yourself, “How much can I afford for a car”?

How can I get the lowest monthly payment?

Factors that can affect your monthly payment are:

  1. Purchase or lease
  2. Your credit score
  3. Total amount financed*
  4. Length of loan – typically 24 – 60 months, with some available for as long as 72 – 84 months for those who qualify;
  5. Down payment and/or trade-in value of the existing vehicle; and. *Total amount financed may also include taxes, fees, additional warranties, any balance on your current vehicle, and registration.

When looking solely at the lowest possible monthly payment, leasing a new vehicle for 24 – 36 months will likely get you there. Your sales representative can help you decide if leasing will work for you based on your driving habits as there is a mileage cap for the length of the lease with additional charges for extra miles. If you drive a lot, leasing may not be your best option.

If you are financing your vehicle, your credit score is a major determinate as to your loan terms and ultimately the monthly payment. The higher your credit score, the lower your payments. If your credit score does not qualify you for the lowest available rates, it may be helpful to have a co-borrower on your loan. That person will have an ownership interest in the vehicle and is responsible for paying the loan if you don’t. Often, this person is a family member or a very close personal friend.

There are many financing options that offer “no money down.” While a down payment may not be required, if you can put some cash down – even $500 – it will lower your payment because the total amount you’re financing is less.

Need to learn more about financing versus leasing? Watch the video below to learn what the difference is between the two and what to think about when considering which option is best for you.



How Much Car Can I Afford Based on Salary

Financial experts have mixed opinions about how much of a person’s monthly budget they should allow themselves to spend on their vehicle. Some recommend spending no more than 10% of your monthly salary on your car, especially if it’s used. With a little more wiggle room in your budget, you could spend 15% to 20% on a new car payment as long as you factor in the costs of gasoline, insurance, and maintenance and can still comfortably make the monthly payments. When all is said and done, the word of caution is to make sure you are including all operating expenses into account when deciding how much you want to spend on your next car.

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Other Expenses to Take Into Consideration

When car shopping, some prospective buyers only look at the sticker price and don’t factor in the costs of fuel, repairs, insurance, sales tax, registration, and so on. Don’t make this mistake. These added expenses may claim another 5-7% of your income. While new cars come with warranties that cover major repairs, you still have the cost of ongoing maintenance such as oil changes, tires, brakes, etc.

How to Calculate Expenses

Before going car shopping in person, it’s a good idea to use a car affordability calculator and to have some vehicles in mind to check out, that fall within your price range. Such a calculator will take into account your credit score, the newness of the vehicle, the loan term you want, and the amount you could afford to pay as a monthly payment to show you how much car and interest you can afford.

NerdWallet suggests opting for a shorter-term on a used car, and longer terms for new cars. This is because used cars tend to have higher interest rates and will cost you more during the course of a long-term loan. A long-term used car loan could also put you at risk of owing more than your car is worth in the future.

Gasoline, registration, insurance, and sales tax take some time and advance preparation to calculate, but it’s a recommended exercise. For convenience, allows you to easily and quickly search cars you’re interested in and determine their annual fuel costs as well as their average miles per gallon.

The easiest way to find out how much insurance you’d pay is to contact your insurance company and request an estimate for the car you’re eyeing. Their estimate will be based on where you live, the vehicle type, your driving history, and various other factors. If your insurance quote and monthly fuel estimate total less than 7% of your monthly income, you’re in the clear.

How about sales tax? Oregon is one of a handful of states that does not have a sales tax. This can be confusing for those who live in Oregon, but like to shop in Washington. WASHINGTON SALES TAX IS NEVER CHARGED TO OREGON RESIDENTS. EVER. In Washington state, sales tax is part of the vehicle registration process.


Now what?


The Express Stores at all Dick Hannah Dealerships

When your shopping for a vehicle online, we have built-in tools that help you determine your monthly payment. When you click on a vehicle in our inventory, you’ll automatically arrive in our Express Store that will walk you through your specific situation to find your payment. This tool already includes any factory offers, rebates, special terms, etc. that are offered by the manufacturer. As you continue through the Express Store, you’ll find payment options that are available on that specific vehicle so you can make a decision with confidence.


Touch-free Buying Process

With our advanced shopping process, you can accomplish the entire process without coming into the dealership. Learn more about our Touch-free Buying Process here.

What to Do Next?

Enjoy your new vehicle! Start shopping now at

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