Plain-English guides to car payments, loans, leasing, depreciation, and total cost of ownership.
A common rule is to spend no more than 15% of your monthly take-home pay on a car payment, or keep the total vehicle cost under 35% of your annual gross income. See examples by salary.
Read →An auto loan builds equity in a car you will own; a lease offers lower monthly payments but no ownership. See which makes more sense for your situation and how to compare costs.
Read →A new car loses about 20% of its value in the first year and around 50% in five years. Learn how depreciation is calculated, when it slows, and which cars hold value best.
Read →Car payment = Loan Amount x [r(1+r)^n] / [(1+r)^n - 1] where r is monthly rate and n is months. See worked examples for $30,000 and $40,000 loans and use the calculator for your numbers.
Read →Aim for at least 20% down on a new car and 10% on a used car. A larger down payment lowers your monthly payment, reduces interest paid, and helps you avoid being underwater on the loan.
Read →Total cost of car ownership (TCO) includes depreciation, loan interest, insurance, fuel, maintenance, registration, and taxes. The average American spends $10,000-12,000 per year on a car.
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