If I make $75,000 a year, how much should I spend on a car loan?
What should I spend on a car loan so I don't overspend or stretch my funds too far? I'm in the market for a new or used car and I make about $75,000 per year.
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Answered on Jul 13, 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.
“The rule that most finance experts use states that you shouldn’t spend more than 10% of your income on a car.
Finding the right car payment
If you take your annual income of $75,000 and divide it by 12 to get your monthly income, you’ll come to $6,250. Now multiply that by 10% to get $625, as per the rule stated above.
From this math, you shouldn’t spend more than $625 on your monthly car note.
For example, a car that’s $35,000 with an interest rate of 3% over 60 months would put you in this range.
How can I save on insurance for my new or used car?
Keep in mind that you’ll also have to budget for other expenses of car ownership, such as:
- full coverage car insurance
While you’re shopping for your car, you also need to look around for car insurance. Take the hassle out of comparison shopping by using the free Jerry app.
An intelligent AI-based tool like Jerry is the easiest and most effective way to find a car insurance policy that is customized for you.”
MORE: How to Buy a New Car
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