To use this calculator, input your annual gross income, monthly income, interest rate, current monthly car payments, down payment, and select the loan term. The calculator will then compute the maximum car price you can afford based on the 20/3/8 rule.
The 20/3/8 rule suggests spending no more than 20% of your annual income on a car, financing it for no more than 3 years, and ensuring that car payments do not exceed 8% of your monthly income. The formula calculates the maximum car price by considering the down payment, interest rate, and loan term.
For example, if your annual income is $50,000, monthly income is $4,166.67, interest rate is 6%, down payment is $10,000, and you choose a 3-year loan term, the calculator will determine the maximum car price you can afford.
While the 20/3/8 rule is a useful guideline, personal financial situations vary. Consider other expenses and financial goals when determining your car budget. For more comprehensive financial planning, explore our Mortgage Calculator and Salary Calculator.