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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our content is written by professionals with a lot of experience and is edited by experts in the field to make sure it is fair, correct, and reliable.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. That way, you know that the information you’re reading, whether it’s an article or a review, is reliable. Bankrate logo.
Car payments are a significant expense for most people. With the average cost of a new vehicle now over $47000, it’s no wonder the typical monthly payment is creeping past $500. But is $500 per month too much to spend on a car payment? The answer depends on your personal financial situation.
What Constitutes a High Car Payment?
There’s no definitive threshold for determining what constitutes a high car payment. General guidelines suggest limiting your monthly vehicle expenses including the payment insurance, gas and maintenance, to 10-15% of your take-home pay.
Let’s say your monthly income after taxes is $4,000. You should keep your car costs below $400 to $600. Based on this, a $500 monthly payment would be too much for most people who make the average amount of money.
People with higher incomes, on the other hand, might be able to afford $500 or more. The important thing is to make sure that the payment doesn’t go over your overall budget and stops you from meeting other financial obligations.
Average New Car Payment Amounts
To provide context, we can look at the latest car payment statistics:
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According to Experian data, the average monthly payment for a new vehicle recently hit $503 for the first time, up from $478 a year earlier.
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For used vehicles, the average comes out to $397 per month.
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Most new car loans now last between 6 and 7 years. When you borrow money for 72 to 84 months, the monthly costs are lower, but you pay more in interest over the life of the loan.
Even though $500 is more than the average, it’s not by much, especially for new cars. Used car payments tend to be lower.
Factors That Determine Affordability
When deciding if $500 or any other amount works for your budget, here are some key factors to consider:
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Income – Your earnings have the biggest impact on what you can afford. Those making $100,000+ per year have more room in their budgets compared to those making $40,000.
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Other debts – What you already owe on credit cards, student loans and other installment loans affects how much you can put toward a car payment.
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Housing costs – If your rent or mortgage payment is high, you may need to keep the car payment low.
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Down payment – The more you put down upfront, the lower your monthly cost will be.
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Interest rate – Today’s average annual percentage rate on a new car loan is about 5%, but scores above 700 can qualify for 2-3%.
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Loan term – Stretching the payments over 6-7 years makes each one smaller, but increases the total interest paid.
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Insurance and fuel – Be sure to account for these additional ownership costs in your budget.
As you can see, someone earning $70,000 with minimal debts could likely handle $500 each month, while someone making $35,000 with student loans may find it to be a stretch. Run the numbers for your unique situation.
Tips for Managing Car Payments
If a $500 monthly car payment would dominate too much of your budget, here are some tips to reduce the amount:
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Shop for an inexpensive used vehicle you can buy with cash rather than financing. Cars 2-3 years old offer the best value.
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Put down a larger down payment of 20% or more to lower the amount borrowed. This also helps you avoid being “upside down” on the loan.
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Opt for a 36 month loan term instead of 60-72 months. This raises the payment but saves on interest.
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Buy below your approved amount. Just because a lender approves you for a certain loan doesn’t mean you have to spend that much.
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Consider leasing. Monthly payments are typically lower compared to financing the same vehicle. You won’t build any equity though.
The most important thing is to choose an affordable payment that fits comfortably within your overall budget. While $500 per month may be reasonable for some, for others it’s simply too much car. Crunching the numbers for your unique situation is the best way to decide.
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- • Auto loans
- • Personal loans
Calendar Icon 8 Years of personal finance experience Kellye Guinan is an editor and writer with over seven years of experience in personal finance.
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Thomas is a well-rounded financial professional, with over 20 years of experience in investments, corporate finance, and accounting. His investment experience includes oversight of a $4 billion portfolio for an insurance group. Varied finance and accounting work includes the preparation of financial statements and budgets, the development of multiyear financial forecasts, credit analyses, and the evaluation of capital budgeting proposals. In a consulting capacity, he has assisted individuals and businesses of all sizes with accounting, financial planning and investing matters; lent his financial expertise to a few well-known websites; and tutored students via a few virtual forums.
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve kept this reputation for more than 40 years by making it easier for people to make financial decisions and giving them confidence in what to do next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our content is written by professionals with a lot of experience and is edited by experts in the field to make sure it is fair, correct, and reliable.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
Ideal payment based on your income
According to Karen Bennett, senior consumer banking reporter at Bankrate, your monthly vehicle payment should not exceed 10 to 15 percent of your salary.
To find this range for your salary, divide your annual pre-tax take-home salary by 12. Multiply that number by 0.1 to find the low end of the range or 0.15 to find the high end.
| Salary | Maximum monthly car payment (10%) | Maximum monthly car payment (15%) |
|---|---|---|
| $20,000 | $167 | $250 |
| $40,000 | $333 | $500 |
| $60,000 | $500 | $750 |
| $80,000 | $667 | $1,000 |
| $100,000 | $833 | $1,250 |
Keep in mind that your payment is only one part of your car budget. The general rule of thumb is to keep every cost — like insurance, gas and maintenance — under the 15 percent range to ensure you aren’t overspending. Calculator Icon Bankrate insight
To find the average monthly payment you can afford, divide your salary by 12. For example, the average salary in early January was $61,984, according to BLS data.
- $61,984 ÷ 12 = $5,165.33
Once you have your monthly salary, multiply it by 0.1 and 0.15 to determine your affordable monthly payment range.
- $5,165.33 x 0.1 = $516.53
- $5,165.33 x 0.15 = $774.80
So, the most affordable monthly payment for the average salary at the end of 2024 is between $516 and $775.
One effective way to ensure your finances stay in check is to follow the 50/30/20 rule, Bennett explains.
“You’ll allocate half your paycheck to essential expenses like rent, food and transportation,” she says. “Another 30 percent will go toward nonessentials like dinner out and streaming services, and 20 percent will be put into savings.” Learn more:
People Who Make Down Payments and Think They Got a Deal
FAQ
What is considered a high monthly payment for a car?
According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn’t your only car expense!.
How much car can you afford for $500 a month?
What kind of car can I get with $500 a month? It depends on how much you put down, the interest rate, and how long you borrow the money. Let’s say you put no money down and took out a 72-month loan with a 6% APR. In that example, your $500 monthly payment would get you a car that sells for between $25,857 and $28,900.
What is a reasonable monthly car payment?
Quick Answer. Experts recommend keeping your transportation costs below 15% of your take-home pay. However, the right amount for you will depend on your personal financial situation. Financial experts recommend keeping your monthly transportation costs to 10% to 15% of your income.
How much is a normal monthly payment for a car?
The average car payment for a new vehicle is $742 monthly, according to Q4 2024 Experian data — down 0. 1% year over year. Mar 18, 2025.