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Car affordability · $45K salary
How much car can I afford on a $45K salary?
A new car doesn't fit a 15% budget at this income: the cheapest new cars start around $21,500 and cost more to insure. On a $45K salary ($45,000 a year), keeping every car cost (payment, insurance, fuel and upkeep) to 15% of gross income, or $563 a month, you can afford a 5-year-old car of about $7,000 with 10% down on a 60-month loan at about 9.5%. Holding to 10% of income, the 20/4/10 rule, would not cover a typical car's running costs.
The answer
Monthly cost
What a $7,000 car costs each month
| Cost | Per month |
|---|---|
| Loan payment | $155 |
| Insurance | $90 |
| Fuel | $183 |
| Maintenance and repairs | $120 |
| Registration | $8 |
| Real monthly cost | $556 |
Lenders only look at the $155 payment, but insurance, fuel and upkeep add $401 a month. The car also loses about $50 a month in value over five years. Out the door with tax and fees it is about $8,090; you put $700 down and borrow $7,390.
Examples
5-year-old cars that fit a $563 monthly budget
11 of 363 5-year-old models fit. Some cost more than $7,000 but still fit because they are cheaper to run.
| Car | About | Efficiency | All-in per month |
|---|---|---|---|
| 2021 Chevrolet Bolt EV | $12,500 | 259 mi range | $561 |
| 2021 Hyundai Elantra Hybrid | $12,300 | 52 MPG | $550 |
| 2021 Chevrolet Spark | $9,900 | 33 MPG | $536 |
| 2021 Nissan Versa | $9,900 | 33 MPG | $538 |
| 2021 Volkswagen Jetta | $9,900 | 31 MPG | $553 |
| 2021 Hyundai Elantra | $9,600 | 33 MPG | $528 |
| 2021 Kia Rio | $9,400 | 36 MPG | $514 |
| 2021 Hyundai Accent | $9,400 | 35 MPG | $516 |
New or used
How far the budget goes new or used
Used cars cost more to borrow for and to repair, but lose less value. The price limit is for a typical car of that age; whether real models fit depends on what they cost and how cheaply they run.
| Car | Price limit, typical car | Models that fit | Typical rate | All-in per month |
|---|---|---|---|---|
| New | $12,000 | 0 of 361 | 7% | $558 |
| 3 years old | $8,000 | 1 of 392 | 9.5% | $553 |
| 5 years old | $7,000 | 11 of 363 | 9.5% | $556 |
Loan length
How the loan length changes it
Longer loans lower the payment and raise the price you can reach, at the cost of more interest and more time owing more than the car is worth.
| Loan | Price you can afford | Payment | Total interest |
|---|---|---|---|
| 36 months | $5,000 | $175 | $835 |
| 48 months | $6,000 | $161 | $1,322 |
| 60 months (assumed) | $7,000 | $155 | $1,922 |
| 72 months | $8,000 | $153 | $2,640 |
Questions
Common questions
What car payment can I afford on a $45K salary?
Keeping all car costs to 15% of income, a loan payment of about $155 a month, leaving room for $401 in insurance, fuel and upkeep. A stricter 10% budget ($375 a month) would not cover a typical car's running costs.
What is the 20/4/10 rule?
Put at least 20% down, borrow for no more than four years, and keep total car costs under 10% of gross income: $375 a month on $45K.
Assumptions
How we worked it out
- Gross income $45,000 a year ($3,750 a month).
- Rent or mortgage and other debts of $940 a month (about 25% of income); total debts stay under 43%.
- 10% down, 60-month loan, good credit (660-719) at about 9.5% for a 5-year-old car, 7% sales tax and $600 in fees.
- 12,000 miles a year at $3.30 a gallon, average insurance costs, a typical 5-year-old car of any body type.
- The budget covers the loan payment, insurance, fuel or charging, maintenance, repairs and registration.
Change any of these in the car affordability calculator.
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