Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can. Overall, Americans are paying more to drive their cars these days, whether the vehicle is leased or purchased. Other data, from Experian, shows monthly car payments overall have risen, too. As you can see in the chart below, which is based on Experian data , car payment costs were up in the second quarter of compared to the second quarter of across both new and used vehicles.
That includes cars that were financed with a loan or leased. The data also shows that many people have been buying cars with auto loans that last nearly six years 72 months. Here is a list of our partners and here's how we make money. Before you hit the dealership you should take a moment to decide what monthly car payment you can afford.
That might leave you feeling you can afford only a beat-up Yugo. NerdWallet recommends using the rule, dividing your take-home pay into three general spending categories:. For many people, a car is a lifeline, connecting them to essential tasks such as holding down a job or transporting the kids to school. However, there's some flexibility in the balanced budget approach. If you want a more expensive car, you could consider part of your monthly payment as spending in the "wants" category, so long as you keep the budget balanced overall.
This includes insurance, gas, repairs and maintenance, parking and even tolls. Add up all your monthly income, subtract expenses everything from rent or mortgage payments to food and healthcare , and see how much is left. For your benefit, the Federal Trade Commission even offers a sample budget sheet online. But don't dedicate every last penny of disposable income to a car. Instead, experts have developed some guiding rules for how much is reasonable to spend.
But those figures aren't realistic for today's shoppers. In part that's because car loans last much longer: In March , the average auto loan surpassed 70 months, according to Edmunds research. If you're not looking at a fancy SUV or pickup truck, that's generally a good number when shopping for more affordable new cars. However, it's important to note that you're responsible for more than just the car payment.
Factor in insurance costs, too, when figuring out your total monthly car expenditure. For this reason, many advisers instead recommend setting a limit for how much your total car expenses will be per month.
That can be an especially important rule for buyers who already have other debts. Your monthly payment can vary significantly depending on your credit score, the length of your loan and the size of your down payment. Once you know how much you can afford to spend, it's time to work out how much you'd pay for the car you want. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Insurance Car Insurance.
Beyond the sales price, buyers should also budget for other expenses like repairs, registration, and insurance. Article Sources.
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Related Articles. Car Insurance How to Buy a Car. Budgeting Car Shopping: New or Used? Partner Links. Related Terms Loan Estimate A loan estimate is a three-page form that presents home loan information in an easy-to-read, well-explained format, making it easy to compare offers.
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