Car Affordability Calculator (20/4/10 Rule)
How much car can you afford? Apply the 20/4/10 rule — 20% down, 4-year loan, car costs under 10% of gross income — for a maximum price.
In short
How much car can you afford? Apply the 20/4/10 rule — 20% down, 4-year loan, car costs under 10% of gross income — for a maximum price.
Formula: Monthly limit = gross income ÷ 12 × cap %. Payment budget = limit − running costs. Maximum loan = payment × (1 − (1 + r)^−N) ÷ r, with r = APR ÷ 1200 and N = term in months. Maximum price = loan ÷ (1 − down %).
What this calculator does
How much car can you afford? Apply the 20/4/10 rule — 20% down, 4-year loan, car costs under 10% of gross income — to get a maximum vehicle price and check any car.
You enter gross household income per year, loan interest rate (apr), monthly insurance, fuel and upkeep (optional) and vehicle price you are considering (optional) and a few other details, and the car affordability calculator (20/4/10 rule) shows the answer along with the working, so you can check it or try other numbers.
The page shows the formula, a numeric worked example, and the assumptions that affect this personal finance calculation.
Inputs and what they mean
- Gross household income per year
- — Before tax.
- Loan interest rate (APR)
- — The rate your lender quotes you.
- Monthly insurance, fuel and upkeep (optional)
- — Counts against the 10% limit if entered.
- Vehicle price you are considering (optional)
- — number value.
- Rule: minimum down payment
- — number value.
- Rule: maximum loan term
- — number value.
- Rule: maximum monthly car cost
- — number value.
- Currency (symbol only, never converted)
- — choice value.
How to use it
- Enter each value in the unit shown next to the box (use the unit converter first if your numbers are in other units).
- Check the breakdown to see every intermediate step.
- Read the limitations before relying on the result.
Formula
The 20/4/10 rule is a common budgeting rule of thumb (20% down, at most 4 years, total car costs at most 10% of gross income), not a lender requirement. All three numbers are editable.
Sales tax, registration and dealer fees are not added; include them in the vehicle price if you want them financed.
Monthly limit = gross income ÷ 12 × cap %. Payment budget = limit − running costs. Maximum loan = payment × (1 − (1 + r)^−N) ÷ r, with r = APR ÷ 1200 and N = term in months. Maximum price = loan ÷ (1 − down %).
Inputs used: Gross household income per year, Loan interest rate (APR), Monthly insurance, fuel and upkeep (optional), Vehicle price you are considering (optional), Rule: minimum down payment, Rule: maximum loan term, Rule: maximum monthly car cost, Currency (symbol only, never converted).
Worked example
80,000 income at 6% APR, no running costs entered
- Monthly limit = 80,000 ÷ 12 × 10% = 666.67.
- Loan = 666.67 × (1 − 1.005^−48) ÷ 0.005 ≈ 28,386.88.
- Price = 28,386.88 ÷ 0.8 ≈ 35,483.60 (down payment ≈ 7,096.72).
Reading the result
The headline figure is the main answer. Any breakdown underneath shows the parts that make it up, so you can check the working and see what changes when you adjust an input.
Limitations and assumptions
- A rule of thumb, not a lending decision; lenders use their own credit and debt-to-income criteria.
- Sales tax, fees, trade-ins and depreciation are not modelled unless you fold them into the price.
- Uses gross income, so it does not reflect your take-home pay or other debts.
- An estimate built only from the figures you enter. It is not financial, tax, legal or employment advice, and real costs, taxes and returns vary.
- The result depends on the values you enter for this car affordability calculator (20/4/10 rule); it does not supply missing rates, rules, prices, dates, or assumptions for you.
Reference: OpenStax
Last reviewed:
Common questions
What is the 20/4/10 rule for buying a car?
Put at least 20% down, finance for no more than 4 years, and keep total monthly car costs (payment plus insurance, fuel and upkeep if you count them) at or below 10% of gross income.
How much car can I afford on my salary?
Enter your gross yearly income and loan rate. The calculator turns 10% of monthly income into the largest 48-month loan that payment supports, then adds the 20% down payment to give a maximum price.
Should insurance and fuel count toward the 10%?
Versions of the rule differ. Enter them in the running-costs box to include them; leave it blank to apply the 10% to the loan payment only.
Can I change the 20, 4 or 10?
Yes. All three are inputs, so you can test stricter or looser versions such as 20/3/8.
How do I use the Car Affordability Calculator (20/4/10 Rule)?
Enter the required values for Gross household income per year, Loan interest rate (APR), Monthly insurance, fuel and upkeep (optional), Vehicle price you are considering (optional), Rule: minimum down payment, and the other fields shown. The calculator applies the formula on this page and shows the main result with any supporting breakdown so you can check the arithmetic.
What formula does the Car Affordability Calculator (20/4/10 Rule) use?
Monthly limit = gross income ÷ 12 × cap %. Payment budget = limit − running costs. Maximum loan = payment × (1 − (1 + r)^−N) ÷ r, with r = APR ÷ 1200 and N = term in months. Maximum price = loan ÷ (1 − down %). The visible formula section above lists the calculation path and the edge cases the page handles, so the result can be checked without relying on the form alone.
Sources
Method based on OpenStax.
Cite this page
Free Calculator. (2026, November 5). Car Affordability Calculator (20/4/10 Rule). https://freecalculator.tech/tools/car-affordability-20-4-10-calculator
"Car Affordability Calculator (20/4/10 Rule)." Free Calculator, 5 Nov. 2026, https://freecalculator.tech/tools/car-affordability-20-4-10-calculator.
Car Affordability Calculator (20/4/10 Rule) — Free Calculator, https://freecalculator.tech/tools/car-affordability-20-4-10-calculator
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