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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.
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Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors cover the topics that people care about most, such as the different types of loans available, the best rates, the best lenders, how to pay off debt, and more. This way, you can feel good about putting your money to work. 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.
Buying a new car is always an exciting experience. However, determining the right car payment that fits your budget can be challenging. A common question for many car buyers is, “Is a $500 car payment too much?” The answer depends on your financial situation. In this comprehensive guide, we will examine how to calculate an affordable car payment, factors that influence your auto loan amount, and tips on getting the best deal.
How Much Should You Spend on a Car Payment?
Before you decide how much you can spend on your monthly car loan payment, a good rule of thumb is to set aside 10 to 15 percent of your take-home pay. Let’s say your monthly net income is $4,000. Aim for a car payment of $400 to $600. This makes room in your budget for things like food, housing, utilities, and savings.
Financial experts caution that your total monthly car costs – including the loan payment, insurance, gas and maintenance – should not exceed 20% of your take-home pay. Using the example above, your total monthly car expenses would be capped at $800 for someone earning $4,000 per month.
Going over these recommended limits puts you at risk of becoming “car poor”, meaning too much of your income goes towards your vehicle. This makes it difficult to afford other necessities and achieve financial goals like saving for retirement or college.
What Factors Determine Your Monthly Car Payment?
Some important things that affect how much your monthly payment will be if you get an auto loan are:
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Vehicle Purchase Price: The total price paid for the car directly impacts the loan amount and monthly payment. A more expensive car means higher payments.
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Down Payment: A bigger down payment lowers the amount that needs to be financed, which lowers the monthly payment. Aim for at least 20% down if possible.
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Interest Rate The rate on your auto loan has a big effect on your payment. Those with excellent credit qualify for the lowest rates reducing their monthly costs.
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Loan Term: You can choose loan repayment terms of 36, 48, 60, 72 or even 84 months. Shorter loan terms have higher payments but pay off the car faster and cost less interest.
To get a more accurate estimate, put your own numbers into an auto loan calculator and see how the payments will change. Only borrow what you can comfortably pay back.
Is a $500 Payment Too Much?
Whether a $500 monthly auto loan payment is too much depends largely on your income and expenses. Here are some guidelines based on salary:
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If you earn $4,000 per month, a $500 car payment fits within the recommended 10-15% of income.
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For an $8,000 monthly income, $500 falls well below 15% and is very affordable.
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However, if you make $2,500 per month, a $500 car payment equals 20% of your income – which is typically considered too much.
Run the numbers for your unique situation, factoring in monthly housing costs, debt payments, insurance and other bills to see if you have enough wiggle room for a $500 car payment. Use a budget calculator to get a full picture of cash flow.
Tips for Getting the Best Auto Loan Terms
To score an affordable monthly payment, here are some tips for qualifying for the best auto loan:
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Boost your credit score: Lenders offer the lowest rates to borrowers with scores above 740. Pay bills on time and lower credit card balances to improve your rating.
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Get pre-approved: Being pre-approved provides bargaining power when negotiating with the dealer and locks in an interest rate.
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Make a large down payment: Putting 20% or more down results in a lower financed amount and reduced monthly payment. Have savings on hand.
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Shorten the loan term: Choose a 3 or 4 year repayment term instead of 5-6 years to dramatically lower interest costs.
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Bring a co-signer: Adding a co-signer with excellent credit can help you qualify for prime rates. Make sure they understand the obligation.
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Compare lender offers: Check rates from banks, credit unions and online lenders. A lower rate can save hundreds over the loan.
The Final Word on $500 Car Payments
A $500 monthly car payment may be perfectly affordable and reasonable for some buyers, while completely out of reach for others based on income and total budget. The wise approach is to carefully consider all regular monthly expenses, create a spending plan that aligns with your financial goals, and ultimately choose an auto loan payment within your means. Use available tools to estimate costs for different loan scenarios and shop around to get approved for the most favorable interest rate possible. With prudent planning, a $500 car payment can be a smart choice for many individuals and households.
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- • Auto loans
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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 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. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
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
Will car payments be higher in 2025?
If you’re considering purchasing a vehicle in 2025, there are some factors to consider. According to Ivan Drury, director of insights at Edmunds, there has been improvement in product availability in 2025, and MSRP discounts continue to increase. Even still, the actual selling price of vehicles has increased.
“This is due to … consumer preferences for SUVs and trucks … along with more vehicles driven by electrified powertrains,” Drury explains. “Additionally, the Fed has signaled that interest rates are not guaranteed to fall throughout the year, and the continued threat of tariffs … could result in notable price increases.”
With increased sale prices and no guarantee of better rates, buyers will need to be strategic in their shopping to avoid car payments that are too expensive for their budget.
Drury shared his top tips for vehicle buyers in 2025:
- Buy sooner. With so much uncertainty ahead, it may be wise to buy now if you’re financially ready rather than waiting to see how prices fluctuate over the coming months.
- Watch your trade-in value. Different dealerships have different inventory needs, so always shop your trade-in. The more you get on a trade-in, the more you can put down on a new vehicle purchase.
- Keep an open mind. A lot has changed over the last several years, and many automakers have revamped their lineups. With many models offering similar tech and safety features, compare costs rather than sticking to one brand.
Learn more:
How Much Car Can You Really Afford? (By Salary)
FAQ
Is 500 a lot for a car payment?
A $500 car payment can be a lot, depending on your income and other financial obligations. It’s usually suggested that your car payment, which includes insurance and other costs connected to the car, shouldn’t be more than 10% to 15% of your take-home pay. If your take-home pay is $5,000 per month, then $500 would be within that range.
Is 500 dollars a month good for a car?
Market Rates: The average monthly payment for a new car in 2023 was about $700, so $500 might not seem like a lot. However, it can be high for certain demographics or in specific financial situations.
What is considered a high car payment?
How much should you make to afford a $500 car payment?
What Kind of Car Payment Can I Afford Based on Salary?Monthly Take-Home Pay (Post-Tax)Monthly Car Payments Should Not Exceed…$1,500$150 to $225 per month$3,000$300 to $450 per month$4,500$450 to $675 per month$6,000$600 to $900 per month.