Car Buying Power Calculator

Monthly Payment Formula:

\[ P = \frac{A \times r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Budget:

Down Payment:

Interest Rate:

Loan Term:

months

Maximum Car Price:

Unit Converter ▲

Unit Converter ▼

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1. What is a Car Buying Power Calculator?

Definition: This calculator determines the maximum car price you can afford based on your monthly budget, down payment, interest rate, and loan term.

Purpose: It helps car buyers understand their purchasing power before visiting dealerships.

2. How Does the Calculator Work?

The calculator uses the loan payment formula:

\[ P = \frac{A \times r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

\( P \) — Monthly payment amount
\( A \) — Loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in months)

Explanation: The formula is rearranged to solve for maximum loan amount based on your monthly budget.

3. Importance of Knowing Your Buying Power

Details: Understanding your realistic price range prevents overextending your budget and helps negotiate better deals.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, available down payment, expected interest rate (default 5%), and desired loan term (default 60 months).

5. Frequently Asked Questions (FAQ)

Q1: Should I include insurance and taxes in my monthly budget?
A: No, this calculator focuses only on the car payment. Consider additional costs separately.

Q2: How does down payment affect buying power?
A: Every dollar of down payment increases your maximum car price by that amount.

Q3: What's a typical interest rate?
A: Rates vary (3-10% for new cars, 5-15% for used), depending on credit score and market conditions.

Q4: How does loan term affect the result?
A: Longer terms increase buying power but result in more interest paid overall.

Q5: Does this include dealer fees and taxes?
A: No, consider adding 8-10% to the calculated price for these additional costs.