Estimate how much car you can realistically afford based on your income, expenses, and desired monthly payment.
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Understanding Car Affordability
Purchasing a car is a significant financial decision. While the excitement of a new vehicle is undeniable, it's crucial to understand how much car you can realistically afford without jeopardizing your overall financial health. This Bank of America Car Affordability Calculator is designed to help you determine a sensible price range for your next vehicle by considering your income, existing financial obligations, and anticipated car ownership costs.
Key Factors in Car Affordability:
Monthly Net Income: This is the money you have available after taxes and deductions. It's the foundation for all your spending and saving.
Existing Debt Payments: Your current loan and credit card payments significantly impact how much discretionary income you have left for a car payment. Lenders often look at your debt-to-income ratio (DTI).
Car Ownership Costs: Beyond the car payment itself, owning a car involves ongoing expenses. These include car insurance (which can vary greatly by vehicle, location, and driver history), fuel, routine maintenance (oil changes, tire rotations), and unexpected repairs.
Desired Monthly Car Payment: While this calculator helps determine what you *can* afford, it's wise to set a target payment that feels comfortable for your budget.
Loan Term and Interest Rate: These directly influence the size of your monthly payment. Longer loan terms and higher interest rates mean you'll pay more in total over the life of the loan.
How the Calculator Works:
The calculator employs a standard loan payment formula (Amortization Formula) to estimate the maximum loan amount you could finance. It then uses this to suggest a vehicle price range.
1. Determine Available Funds for Car Payment:
The calculator first estimates the portion of your monthly net income that could be allocated to a car payment. A common guideline is to keep total monthly car expenses (payment, insurance, fuel, maintenance) below a certain percentage of your net income, often around 15-20%. However, this calculator focuses on the maximum desired monthly car payment as a primary constraint to ensure comfort.
2. Calculate Maximum Loan Amount:
Using the Desired Monthly Car Payment, the Loan Term, and the Estimated Annual Interest Rate, the calculator computes the principal loan amount (P) you can afford using the following formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment (Desired Monthly Car Payment)
P = Principal Loan Amount (what we're solving for)
n = Total number of payments (Loan Term in Years * 12)
Rearranging to solve for P:
P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
3. Estimate Total Vehicle Price:
The calculated Maximum Loan Amount is the basis for your car purchase. The total affordable vehicle price is this loan amount plus any down payment you plan to make (though this calculator focuses on the loan amount itself for simplicity). It's recommended to also factor in taxes, fees, and potential registration costs, which are not included in this basic affordability estimate.
Important Considerations:
This calculator provides an estimate. Your actual car affordability may vary based on lender approval, credit score, and specific loan terms.
Always aim for a monthly payment that fits comfortably within your budget, leaving room for other financial goals like saving and investing.
The estimated ongoing costs (insurance, fuel, maintenance) are crucial. Ensure you can manage these costs in addition to your car payment.
Consider visiting a Bank of America financial advisor to discuss your specific situation and explore financing options.
function calculateCarAffordability() {
var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value);
var currentDebtPayments = parseFloat(document.getElementById("currentDebtPayments").value);
var carInsuranceEstimate = parseFloat(document.getElementById("carInsuranceEstimate").value);
var fuelMaintenanceEstimate = parseFloat(document.getElementById("fuelMaintenanceEstimate").value);
var desiredMonthlyPayment = parseFloat(document.getElementById("desiredMonthlyPayment").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var estimatedInterestRate = parseFloat(document.getElementById("estimatedInterestRate").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(monthlyIncome) || monthlyIncome <= 0 ||
isNaN(currentDebtPayments) || currentDebtPayments < 0 ||
isNaN(carInsuranceEstimate) || carInsuranceEstimate < 0 ||
isNaN(fuelMaintenanceEstimate) || fuelMaintenanceEstimate < 0 ||
isNaN(desiredMonthlyPayment) || desiredMonthlyPayment <= 0 ||
isNaN(loanTerm) || loanTerm <= 0 ||
isNaN(estimatedInterestRate) || estimatedInterestRate suggestedMaxTotalCarExpenses) {
resultDiv.innerHTML = "Your desired total monthly car expenses (payment + insurance + fuel/maintenance) might be too high for your income. Consider reducing your desired payment or other expenses." +
"Estimated Total Monthly Car Costs: $" + totalEstimatedCarExpenses.toFixed(2) + "" +
"Suggested Max Total Monthly Car Costs (20% of Income): $" + suggestedMaxTotalCarExpenses.toFixed(2) + "";
// We still proceed to calculate loan amount based on desired payment, but flag it.
}
// Calculate monthly interest rate
var monthlyInterestRate = (estimatedInterestRate / 100) / 12;
// Calculate total number of payments
var numberOfPayments = loanTerm * 12;
var maxLoanAmount = 0;
// Handle case where interest rate is effectively zero to avoid division by zero
if (monthlyInterestRate === 0) {
maxLoanAmount = desiredMonthlyPayment * numberOfPayments;
} else {
// Calculate maximum loan amount using the amortization formula rearranged
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = desiredMonthlyPayment * (numerator / denominator);
}
// Display the results
resultDiv.innerHTML = "Estimated Maximum Car Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"This means you could potentially afford a vehicle with a total price around $" + (maxLoanAmount + (desiredMonthlyPayment > 0 ? (desiredMonthlyPayment / monthlyInterestRate) : 0)).toFixed(2) + " (assuming zero down payment and including estimated loan interest over time). Consider potential taxes, fees, and a down payment for the actual purchase price.";
}