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Car Affordability Calculator

See what car price you can afford from your monthly payment budget, loan rate and term, down payment, trade-in, sales tax and fees.

Level: Grades 11–12

  • Common Core standard HSA.SSE.B.4Derive the formula for the sum of a finite geometric series (when the common ratio is not 1), and use the formula to solve problems.
Printable worksheet

Car Affordability Calculator

Know the answer you need? Pick an input to work backward.

Inputs

Your state and local rate. Enter 0 if none.

Sales tax is charged on

Many states tax only the difference after a trade-in; some tax the full price.

Result

Car price you can afford

$31,085.85

A $500.00 monthly payment over 60 months at 7% supports a $25,251.00 loan, which with your down payment and trade-in buys a car priced up to about $31,085.85 before tax and fees.

Loan amount
$25,251.00
Sales tax
$1,565.15
Total cost with tax and fees
$33,251.00
Trade-in equity
$5,000.00
Total interest
$4,749.00
Total of loan payments
$30,000.00
Where the money goes
  • Car price$31,085.8581.8%
  • Sales tax$1,565.154.1%
  • Fees$600.001.6%
  • Loan interest$4,749.0012.5%

See the step-by-step solution ↓

Step-by-step solution

  1. Work out how big a loan your payment B can pay off in 60 months. A standard formula does this, with the monthly rate i = APR ÷ 12: B × (1 − (1 + i)^−n) ÷ i

    $500.00×(1−(1+0.00583333)−60)0.00583333=$25,251.00

  2. Add up everything you bring to the deal. This must cover the car, tax and fees: loan + down payment + trade-in value − amount still owed on it

    $25,251.00+$3,000.00+$5,000.00−$0.00=$33,251.00

  3. The price plus its tax plus fees must equal what's available. Tax is only on the price minus the trade-in, so price = (available − fees + tax rate × trade-in) ÷ (1 + tax rate)

    $33,251.00−$600.00+6%×$5,000.001+6%=$31,085.85

  4. Work out the sales tax on the part of the price that's taxed

    $26,085.85×6%=$1,565.15

  5. Total interest: add up all the payments, then subtract the amount you borrowed

    $500.00×60−$25,251.00=$4,749.00

Test yourself

20 quick questions built from this calculator's formula: work out results, predict what happens when an input changes, and work backward from an answer. Every answer comes with the working.

Please note: Results are estimates for planning and comparison. Lenders, banks, and tax authorities may round differently or include fees not modeled here, so confirm figures with your provider before deciding.

What this calculator does

Find out how expensive a car you can buy with the monthly payment you're comfortable with. The calculator works backward from that payment. First it finds the loan the payment can cover at your rate and term. Then it adds your down payment and your trade-in equity (what the trade-in is worth minus what you still owe on it). Last, it takes out sales tax and fees. What's left is the most you can pay for the car itself.

Shopping by monthly payment alone is how many buyers end up with longer loans and more interest than they planned. Turning the payment into a price keeps your focus on what you're actually buying. The results also show the loan amount, the total interest and the full cost with tax and fees. That way you can see what the budget really commits you to.

Where it's used

Why this math matters outside the classroom:

  • Setting a car budget. Shoppers find that $500 a month for 60 months at 7% supports a loan of about $25,251.
  • Comparing loan terms. Buyers compare how much more car a 72-month loan reaches than a 60-month loan, and what the extra interest costs.
  • Trade-in decisions. Owners who owe $7,000 on a car worth $5,000 see the $2,000 of negative equity come off what they can spend.
  • Sales tax rules. Buyers in states with a trade-in credit pay 6% tax on the price minus a $5,000 trade-in rather than on the whole price.
  • Present value practice. Students solve the loan payment formula for the amount borrowed when the monthly payment is known.

Grade level and standards: Grades 11–12; Common Core State Standards for Mathematics HSA.SSE.B.4. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.

How to use it

  1. Enter the monthly payment you can afford, the loan's interest rate and the term in months or years.
  2. Enter your cash down payment, the value of any trade-in and how much you still owe on it.
  3. Enter your sales tax rate. Choose whether tax is charged on the full price or on the price minus the trade-in. Then enter the fees you expect.
  4. Read the car price you can afford. Then check the loan amount, total interest and total cost.

What the inputs mean

Monthly payment you can afford
The payment for the loan only. Insurance, fuel and maintenance come on top, so leave room for them in your budget.
Loan term
Longer terms let the same payment carry a bigger loan, but they add interest. The car may also be worth less than you owe for longer.
Still owed on the trade-in
If you owe more on the trade-in than it's worth, the difference is called negative equity. It reduces what you can spend on the new car.
Sales tax rate
Your state and local rate. Enter 0 if none.
Sales tax is charged on
Many states tax only the difference between the price and the trade-in value, which lowers the tax. Others tax the full price. Check your state's rule.
Title, registration and dealer fees
Title, registration, documentation and other dealer fees, whether you pay them up front or add them to the loan.

Formula and method

i = APR ÷ 100 ÷ 12;  n = term in months
loan = B × (1 − (1 + i)^(−n)) ÷ i;  at 0%: loan = B × n
available = loan + down payment + trade-in value − amount owed
with a trade-in credit: price = (available − fees + t × trade-in) ÷ (1 + t)
taxing the full price: price = (available − fees) ÷ (1 + t)
sales tax = t × taxable amount;  total interest = B × n − loan

i is the monthly interest rate, n is the number of monthly payments and B is your monthly budget. APR is the yearly interest rate. t is the sales tax rate as a decimal (6% is 0.06).

The loan line is the standard loan-payment formula, worked backward to find the amount you can borrow. It finds the loan whose equal monthly payments, at rate i over n months, match your budget.

Everything you bring to the deal has to cover the price, the sales tax and the fees. That's the loan, the cash and the trade-in equity. The tax depends on the price, so the calculator finds the price by solving that one equation. If the trade-in is worth more than the car, no sales tax is due under a trade-in credit.

Worked example

You can pay $500 a month for 60 months at 7%, with $3,000 down and a $5,000 trade-in you own outright. Sales tax is 6% on the price minus the trade-in, and fees are $600.

  1. Loan: $500 × (1 − 1.00583333^(−60)) ÷ 0.00583333 ≈ $25,251.00.
  2. Available: $25,251.00 + $3,000 + $5,000 − $0 = $33,251.00.
  3. Price: ($33,251.00 − $600 + 6% × $5,000) ÷ 1.06 ≈ $31,085.85.
  4. Sales tax: ($31,085.85 − $5,000) × 6% ≈ $1,565.15.
  5. Total interest: $500 × 60 − $25,251.00 ≈ $4,749.00.

Result: You can afford a car priced at about $31,085.85. With $1,565.15 of tax and $600 of fees, the total is $33,251.00. The loan costs $4,749.00 in interest over five years.

Understanding the result

Treat the price as a ceiling. Negotiating below it lowers the loan, the tax and the interest. Or it leaves room for the costs of owning the car.

Compare a few terms. A longer term raises the price you can reach, but also the interest. Check the total interest before you choose it.

If the trade-in shows negative equity, that debt is being rolled into the new purchase. Paying it down first, or keeping your current car longer, may be the cheaper choice.

Assumptions and limitations

  • A fixed-rate loan with the same payment every month, paid at the end of each month. Interest each month is APR ÷ 12 on what you still owe.
  • All the cash, trade-in equity and loan go toward the price, sales tax and fees. Amounts aren't rounded to the cent.
  • Sales tax is a single rate you enter, applied to the price or to the price minus the trade-in. Fees aren't taxed.
  • Rebates, dealer add-ons, extended warranties and gap insurance aren't included unless you add them to fees.
  • Lenders may limit the loan based on the car's value or your income. So a payment you can afford may not be approved at that size.
  • State rules on taxing trade-ins, rebates and fees vary. Confirm your state's rules.

Frequently asked questions

How much car can I afford on $500 a month?

It depends on the rate, the term and what you bring to the deal. At 7% for 60 months, $500 a month carries a loan of about $25,251. With $3,000 down, a $5,000 trade-in, 6% tax and $600 of fees, that buys a car priced at about $31,085.85.

Should I take a longer loan to afford a nicer car?

It raises the price you can reach. But you pay more interest, and the car may be worth less than the loan for longer. Try 48, 60 and 72 months in the term field. Then compare the price you gain with the extra interest.

Why does the trade-in lower my sales tax?

In states that give a trade-in credit, tax is charged only on the price minus the trade-in value. On the default figures, that taxes $26,085.85 instead of the full price. It lets you afford about $283 more car than taxing the full price would.

What else should my car budget cover?

Insurance, fuel or charging, maintenance, repairs, parking and registration renewals. The monthly payment here is only the loan, so set it low enough to leave room for the rest.

How this calculator is checked

Method: Present value of a level-payment annuity at APR ÷ 12; price solved from price + sales tax + fees = loan + down payment + trade-in equity. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.

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