How Much Can I Afford to Spend on a Car?

Shopping for a new car can be stressful—and it's not hard to see why. Statistics show that it can be easy to end up with more than you can afford, leading to even greater feelings of anxiety down the road. According to recent data from TransUnion, a credit reporting agency, Americans between the ages of 18–40 are experiencing higher auto loan delinquency rates than their pre-pandemic levels^†. Meanwhile, average monthly car payments are $667 per month for new cars and $515 per month for used cars^‡.

At Huntington, we know how important it is to feel comfortable with big-ticket decisions like buying a new car. We’re here to offer advice to help you avoid getting in over your head.

How can I figure out how much I can afford to spend on a new car?

Most people only budget for their monthly car payment but, depending on where you live, you could end up paying a significant amount per month for car insurance. So, be sure to get a quote from your insurance company before committing to a particular car.

Then, map your most frequent driving routes, like your commute and regular trips to shop, go to the gym, or visit a friend. Use that mileage and route information to calculate how much you’ll pay per month on things like gas, parking, and tolls.

Next, subtract all that from the total amount you can afford to spend on a car each month, and that’s the real monthly payment amount you most likely can afford. Then, use Huntington’s car affordability calculator to help you figure out how much you can spend on a car.

I’m thinking about leasing instead of buying. What cost factors do I need to consider?

Since driving more than the number of miles per year in your contract will cost you more, it’s important to consider whether your driving routine is likely to change over the course of your lease. Will you be moving? Do you expect a job location change? Will anyone else be using your car? Things like that can really affect your cost. Try our leasing vs. buying a car calculator to help understand which option could be better for you.

I’m saving toward a down payment. Is there a rule of thumb about how much I should plan to put down?

Putting more money down can help you get a more affordable monthly payment. Our auto calculators can help show you how different down payment amounts will affect your monthly payment. But be careful not to pour all your savings into a down payment. For example, if you have $7,000 saved, it might make sense to put $5,000 toward a car payment and keep $2,000 for an emergency fund.

My car dealer suggested a longer-term loan to make my car payment more affordable. What are the pros and cons of extending the loan term?

The longer the loan term, the smaller your payments may be, but you could also end up paying more in interest. For example, a 36-month loan on the average amount for a new car of $40,290 will cost a total of $43,458 in total payments. Jumping to a 60-month loan term will increase that number to $45,874, while a 72-month loan term will bring it up to $47,029^§.

What else can I do to help protect myself financially during the car shopping process?

If you’re not able to put a lot of money down on a car, or need to take a longer-term loan to make the payment more affordable, you may want to consider asking your car insurance company or dealer about gap insurance.

That coverage can help kick in if you total the car during the window of time when you owe more on the car than the assessed value—the amount your regular insurer would pay out on it. Gap insurance can help cover the difference, which can really come in handy.