How Much Can I Afford to Spend on a New Car?

Buying a new vehicle is exciting but doing the research and making the right decision is a hefty task. Picking up a car payment or increasing your monthly auto payment can be like walking into the unknown. However, it doesn’t have to be. With some pre-planning and solid calculations, you can drive off knowing you are financially sound. 

General Rule of Thumb: Spend No More than 15% of Your Monthly Income on a Vehicle

The general rule of thumb is to spend no more than 15% of your take-home monthly income on total car expenses. Within this 15% it is important to include gas, car insurance, maintenance, repairs and other incidentals.

Be sure to think of everything! If your current vehicle is costing you a lot in repairs, it may be safe to say a newer automobile will cut that cost or better yet, potential repairs will be covered under warranty.

Calculate EVERYTHING You’ll be Spending on a Vehicle

Often when we think about financing a vehicle, we focus on the monthly payment amount. It is best practice, however, to look at all costs associated with your automobile.

If you have a long commute, your gas expenditure can make a difference in how much is going out-of-pocket. However, if you are looking at a more fuel-efficient vehicle, your gas budget may go down and therefore offset a larger car payment.

EVERYTHING includes car washes, windshield wipers, jumper cables, insurance and anything related to your vehicle. 

Additional Auto Expenses

It’s the little things after the initial purchase that can really add up. Remember though, the little things that will extend the life of your vehicle and save you money in the long run, are important items in the budget.

Maintenance: A little preventative TLC can save you big down the road. Factor in oil changes, tire rotations, air filter replacements and other standard upkeep on your vehicle.

Repairs: According to AAA, the average monthly cost associated with car repairs is $99.00. This of course has variables. If you have a family friend that is a mechanic or you are well versed in fixing cars, this monthly amount may be offset.

Insurance: Car insurance can cost a pretty penny. However, it may be worth it to talk to your insurance agent about how to lower your monthly premium.

Extra Costs Above the Sticker Price

Before you pick your vehicle, test drive it and fall in love, make sure you have accounted for extra costs above the sticker price. On average, extra costs will be about 10% of the cost of the vehicle.

Dealer Fees: Car dealerships will allocate charges for paperwork related to the sale, including contracts, titles, DMV filings and sales tax. While fees such as extended warranties are negotiable, dealer’s fees can vary from state-to-state.

Yearly Registration: For a monthly estimate, divide your current annual registration amount by 12 months. A newer vehicle or one that is more expensive may need a bit added for a more accurate figure.

Interest: If you are financing, plan for interest. Interest will depend on many factors such as your credit score and loan terms. 

Don’t Ignore the Total Dollar Amount

It’s important to pay attention to more than just your monthly payment. All items combined, gas, maintenance, repairs and extra costs, will factor into the amount you spend on your vehicle. Be sure to factor all incidentals into your calculations. 

Utilize the MCCU Auto Loan Calculator

Utilizing the MCCU Auto Loan Calculator is a great way to determine the amount of a monthly car payment. It will allow you to determine how payments and total costs change depending on interest rates, the duration of a loan, and the total price of a vehicle.

Are you in the market for a new vehicle? Missouri Central Credit Union offers some of the best rates in town! In addition, we do not have any hidden charges, application fees or prepayment penalties. Our financing includes your choice of payment date and we offer affordable warranties, GAP and payment protection.


Be sure to reach out to Missouri Central Credit Union at (816) 246-0002 with any questions!

Use the MCCU Auto Loan Calculator