How much car can I afford?

Financial experts recommend your total monthly car expenses (payment, insurance, gas, maintenance) not exceed 15-20% of gross monthly income. A common rule: car payment alone shouldn't exceed 10% of gross income. For a $4,000 monthly income, that's a maximum $400 car payment.

Should I finance a new or used car?

Used cars offer better value as new cars depreciate 20% immediately and 50-60% in five years. However, used cars may have higher interest rates and maintenance costs. Consider certified pre-owned for warranty protection. A 2-3 year old car offers the best balance of value, reliability, and lower depreciation.

What's a good interest rate for a car loan?

Auto loan rates vary by credit score: excellent credit (720+) might get 4-6%, good credit (680-719) 6-8%, fair credit (620-679) 8-12%, poor credit (below 620) 12%+. New cars typically have lower rates than used. Shop multiple lenders including credit unions, which often offer the best rates.

How long should my car loan be?

Shorter loan terms (36-48 months) have higher payments but much lower total interest. Longer terms (60-72 months) offer lower payments but cost thousands more in interest and risk owing more than car's value (underwater). Avoid 84+ month loans. If you need a 72+ month loan, you probably can't afford that car.

Should I put money down on a car loan?

Yes, aim for at least 10-20% down payment to reduce monthly payments, lower interest costs, and avoid being underwater (owing more than car's worth). Down payments are especially important for new cars due to rapid depreciation. Larger down payments also help you qualify for better interest rates.