This car affordability calculator turns a monthly payment budget into a car price. You choose what share of your gross income goes to the car payment, and it works out the largest loan that payment repays at your rate and term, adds your down payment, and shows the result as the maximum price, with the interest you would pay and your total debt-to-income ratio. It is one of the tools in our guide to buying a car in Canada.
What the inputs mean
| Input | What to enter |
|---|---|
| Gross annual income | Your yearly income before tax |
| Monthly debt payments (excl. car) | What you pay each month on other debts, such as a mortgage, credit cards, student loans and lines of credit |
| Down payment available | Cash, or the value of a trade-in, that goes toward the car (trading in vs selling privately compares the two) |
| Interest rate (%) | The annual rate you expect on the car loan |
| Loan term | 48, 60, 72 or 84 months |
| Max % of income for car | 10%, 15% or 20% of gross monthly income for the car payment |
The values the calculator starts with, used in the worked example below, are placeholders, and the starting rate is not a current quote. A pre-approval from a bank or credit union gives you a real rate to enter; car loan rates by lender and credit score are compared on our debt pages.
How the result is worked out
- Monthly income: gross annual income divided by 12.
- Maximum car payment: monthly income times the percentage you chose.
- Maximum loan: the loan that payment repays over the term at your rate, with interest compounded monthly.
- Maximum car price: the maximum loan plus your down payment.
- Total interest: the payment times the number of months, minus the loan.
- Total debt-to-income ratio: your other monthly debt payments plus the car payment, divided by monthly income.
Three things follow from how it is built:
- The percentage is for the loan payment only. Insurance, fuel, maintenance and parking are not in it, so the result follows the payment-only reading of the 20/4/10 rule, not the strict one where 10% has to cover every car cost.
- Your other debts don’t change the price. They appear only in the debt-to-income ratio, so a large ratio is a signal to look at the budget again rather than something the price already allows for.
- Sales tax and fees are inside the price. The result is what the loan and the down payment can pay in total, so the car’s sticker price has to leave room for the sales tax on a car in your province.
A worked example
With the calculator’s starting values: income of $65,000, other debts of $500 a month, a down payment of $5,000, a rate of 6.99%, a term of 60 months and 15% of income for the car.
| Step | Result |
|---|---|
| Monthly income | $5,416.67 |
| Maximum car payment | $812.50 |
| Maximum loan | $41,042.65 |
| Maximum car price | $46,042.65 |
| Total interest | $7,707.35 |
| Total debt-to-income ratio | 24.2% |
Choosing the percentage
The three settings are a range to compare, not a recommendation for your situation. At 10%, the result is the payment-only version of the 20/4/10 rule, provided you also choose the 48-month term and put 20% down. The rule itself, its strict version and a price-by-income table worked out from it are on how much to spend on a car, which also lists every cost the monthly budget has to cover.
A larger percentage raises the maximum loan in proportion, and a longer term raises it too, since the same payment repays a larger loan over more months. A longer term also adds interest; the risks of long car loans, and of owing more than the car is worth, are covered in how to finance a car. Each dollar of down payment adds one dollar to the price, because the payment sets the loan and the down payment sits on top of it.
Related calculators
- Car loan calculator: the payment on a car you have already picked
- Lease vs buy calculator: the total cost of leasing and of buying the same car, with the trade-offs explained in leasing vs buying a car
- Budget calculator: how a car payment fits into your monthly budget
- Salary calculator: your after-tax income
- Income percentile calculator: where your income ranks in Canada
- Debt service ratios (GDS and TDS): how a car payment counts when you apply for a mortgage