Budget first, then the car
Most car loan calculators start from a price and tell you the monthly payment. That answers the wrong question if what you really know is how much you can spend on a car each month. A car costs far more than its loan payment: insurance, fuel or charging, servicing, tyres, parking, tolls and annual registration all come out of the same monthly budget. This calculator starts from that all-in budget, sets the running costs aside first, and only then works out how large a loan the rest can support and what sticker price that loan buys.
Recurring costs vs upfront costs
Recurring costs are paid every month for as long as you own the car, whichever car you choose: insurance, fuel, a maintenance reserve, parking and tolls, plus annual fees divided by twelve. Upfront costs happen once: the cash down payment, purchase tax and one-off dealer or registration fees. The down payment comes from savings, not from the monthly budget. Fees entered here are assumed to be added to the loan, so they reduce the price you can afford without changing the monthly payment.
The formula
Payment room A = monthly budget − running costs. With a monthly rate i = annual rate ÷ 12 and a term of n months, the largest loan that A can repay is L = A × (1 − (1 + i)−n) ÷ i, the standard annuity formula run backwards (at a 0% rate it is simply A × n). The loan has to cover the price plus purchase tax plus fees, less the down payment, so the maximum sticker price = (L + down payment − fees) ÷ (1 + tax rate). Total loan payments are A × n and the modelled interest is A × n − L.
Worked example
Take a budget of 800 a month. Insurance is 100, fuel 100, a maintenance reserve 50, parking and tolls 30, and registration 240 a year, which is 20 a month: running costs total 300, leaving 500 for a loan payment. At a 6% annual interest rate over 60 months, 500 a month repays a loan of 25,862.78. With 5,000 down, 500 of fees added to the loan and a 5% purchase tax, the maximum sticker price is (25,862.78 + 5,000 − 500) ÷ 1.05 = 28,916.93. The 60 payments total 30,000.00, of which 4,137.22 is interest. At that price the loan payment is exactly 500 and the full monthly outlay is the 800 budget.
How the loan term changes the answer
With the same 500 payment and 6% rate, a 48-month loan finances 21,290.16 (price 24,562.06), 60 months finances 25,862.78 (price 28,916.93), 72 months 30,169.76 (price 33,018.82) and 84 months 34,226.52 (price 36,882.40). The interest grows from 2,709.84 to 7,773.48 across that range. Stretching the term makes a more expensive car fit the monthly budget; it does not make any car cheaper, and it keeps you in debt longer while the car loses value.
Interest rate vs APR, and cash flow vs depreciation
Enter the loan's nominal annual interest rate. An APR also folds fees into a single rate; if you enter an APR here and also enter the fees, they are counted twice. Lenders' rules, minimum down payments and credit checks are not modelled.
Depreciation is not a monthly bill, so it is not part of the budget here. It still matters: it is the largest cost of owning most cars, and it decides how much you get back when you sell. A budget that works month to month can still be an expensive choice over the life of the car.
Already have a car loan? If you owe more than your trade-in is worth, compare paying that gap now with rolling it over using the negative equity calculator. To see the payment for a specific loan, use the loan payment calculator, and keep a separate cash reserve for repairs and job loss with the emergency fund calculator.
FAQ
Does this tell me what a lender will approve?
No. It shows what fits the monthly budget you chose under the rate and term you entered. A lender looks at your income, other debts and credit history, and may offer a different rate or require a larger down payment.
Which running costs should I include?
Everything you will pay monthly or yearly because you own the car: insurance, fuel or charging, a reserve for servicing and tyres, parking, tolls and annual registration or road tax. Get an insurance quote for the actual model, because premiums vary a lot between cars.
How is purchase tax handled?
As an illustrative percentage of the full sticker price, added to the amount you must finance or pay. Local rules differ: some places tax only the price after a trade-in, exempt certain vehicles or use a fixed fee. Enter 0 if your purchase is not taxed, and check the rules where you buy.
What if the interest rate is 0%?
Then the loan is simply the payment room times the number of months. In the example, 500 × 60 = 30,000, giving a maximum sticker price of 32,857.14. Check whether a 0% offer replaces a cash discount you would otherwise get.
Is a longer loan term a good way to afford a nicer car?
It raises the price that fits the payment, but you pay more interest and the car is likely to be worth less than the loan for longer, which is how negative equity builds up. The 48- to 84-month comparison above shows the trade-off for the example.
Educational estimate only, not financial advice or a loan offer. It does not include depreciation, trade-in value, insurance quotes, local taxes or lender requirements.