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?"

“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
  • Maintenance
  • Gasoline
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.”
Eric Schad
Answered on May 26, 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.

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