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How large of a car loan can I get?
I want to finance a new car. I have my eyes set on a Cadillac, but I’m not sure if I can afford it. How much car can I afford to get with a car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
A Cadillac is one sweet whip! While you could get a
car loan
for it in an ideal world, don’t overextend yourself or stretch your finances too thin. The only problem is that, depending on who you ask, people state that you can afford a car loan between 10% and 50% of your take-home pay.However, the amount of the car loan depends on several other factors, but mainly your debt. If you had no other bills and live with your folks, a loan that’s equal to 50% of your after-tax pay isn’t out of the realm of possibility. But it doesn’t leave much in the way of an emergency fund or savings.
So let’s take a more risk-averse and moderate option to your car loan. As a general rule, spend no more than 10% of your after-tax pay on a car loan and no more than 20% on all car-related expenses, such as gas, maintenance, and insurance.
For example, if you make $5,500 a month after taxes, don’t spend more than $550 on a car payment or $1,100 on car-related expenditures.
If you want to cut these expenditures down, you can increase your loan term to get a lower monthly payment, but note that you’ll pay more in interest. A more direct and surefire way to save money is by getting the lowest price possible on your car insurance with the Jerry app.
As a licensed broker,
Jerry
helps you find and compare quotes from over 50 top providers in minutes. When you find a great rate for your new vehicle, Jerry can help you buy your new coverage! Jerry customers save an average of $879 per year!View full answer
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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