If I only make $32,000 per year, can I get a car loan for $20,000?
"I want to buy a new car, and I have my eye on one that costs $20,000, but I currently make about $32,000 per year.
Is it a good idea to get a car loan for this amount? Will I even get approved?"
Answer provided by
Answered on May 26, 2021
“You’ll have to do a few calculations to decide if this purchase will fit your budget. Many people forget about the extra costs of purchasing a vehicle, which can become expensive right out of the gate. These expenses include:
- Full coverage car insurance, as it’s a requirement for all auto loans
- A monthly payment for your car note
- One-time costs, including taxes, title, and registration
As a general rule, your car note shouldn’t be more than 10% of your gross monthly income. In your case, this would equate to $266.67. With a $20,000 car that’s entirely financed, your note would almost certainly be higher than this rate.
Add in over $100 a month for insurance, as well as gas and maintenance, you could get approved for the loan, but it might put you in financial ruin.”
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