How do I calculate the debt-to-income ratio for my car loan?

I've read that the debt-to-income ratio is important for getting a car loan, provided it stays at 43% or less. How do I calculate my debt-to-income ratio?

Answer
The debt-to-income ratio is a major factor in car loan approval because it helps determine your risk for defaulting on the car loan. It’s surprisingly simple to calculate.
To figure out your debt-to-income ratio:
  • Add up all of your monthly debt payments (this is the minimum monthly payment for credit cards)
  • Add together all of your pre-tax income
  • Divide the debt by the income to get your debt-to-income ratio
  • Multiply this by 100 to get a percentage
For example, let’s say your debt is $2,200 a month and your pre-tax income is $7,000 per month. Your debt-to-income ratio would be $2,200/$7,000 = .314 or 31.4%. If you’re getting a car loan and you have strong credit and steady income, this ratio would almost certainly net you a car loan.
Don’t forget that when you finance a car, the lender will require full coverage car insurance, so you have to budget accordingly. Use the Jerry app to find the best prices on car insurance. Jerry compares personalized rates from over 50 top car insurance companies, including Nationwide, Allstate, and Travelers, and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!
Eric Schad
Answered on Nov 24, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
thumb-up

Did this answer help you?

Ask us a question by email and we will respond within a few days.
thumb-up

Have a different question?

You can meet us at our office and discuss the details of your question.
Let Jerry’s experts help you find savings on your car insurance!
No long forms or spam · Get quotes from 40+ carriers
Find insurance savings (100% Free)
rating primary
4.7/5 Rating on App Store

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies
Find insurance savings — it's 100% free