% income = car payment?

Question

Can someone tell me how much car can I afford based on my income? ie: my car payment will be (blank) % of my income???

Answer 1

It will vary from lender to lender, and will vary based on Gross or Net Pay.

Typically, most banks look at 15-30% of your net pay, depending on how much revolving and installment debt you have, and will use that as a payment cap.

Some lenders don't look at monthly payment as a percentage, instead they look at total debt to total income percentage ratio.

Rule of thumb: try to keep a car not to 15% or less of your net pay, 30% or less of your gross pay, and always try to stay below the 50% of net to debt ratio.

Answer 2

when a person tries to buy a house they figure it on percentage of income, but I never heard of figuring a car payment on a percentage of your income. For one thing we don't know if you are a professional and need your (new and expensive looking) car to look good to drive people around in, and we don't know your income and what size car fits into your budget. We don't know the area of the country you live in (where costs may be higher), or the cost of your rent and utilities, nor do we know the cost of insurance for your age, etc. Dealerships are in it for the money and will give you the biggest car they can but you may not be able to afford that because they don't know your lifestyle and what you owe.

Answer 3

Go here: https://www.eloan.com/quotesubmitauto?sid=C9OdXv_SowMisCIdup6ceZLoVh8&user=&mcode=&calculatorType=purchase and choose "Desired Monthly Payment".

It will tell you how much YOU can afford to pay for a car based on your own specifications.

Good Luck.

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Answer 4

It is usually about 18% of your income! I am a finance manager at a dealer.

Answer 5

It depends on how much of your money that you spend.
If you have a lot of other bills, it will be a smaller percentage than if you had only a few other bills to pay.