How Much Car Can I Really Afford?

Do you have your eye on a brand-new ride? Shopping for the vehicle of your dreams can be an exhilarating experience. Something about that new car smell with performance, reliability and safety updates can put you in a buying mood. 

However, getting caught up in the moment could make it easy to overspend. So, before you fork over your hard-earned cash, learn more about car-buying costs that may help you determine your dream car budget.

Common Car Buying Costs to Consider

While everyone's financial situation and budgeting preferences differ, some financial experts suggest that vehicle expenses shouldn't exceed 20% of your monthly income. That percentage includes (but is not limited to) the following items:

• Annual maintenance (tires, oil changes, etc.)
• Annual registration fees
• Down payment
• Fuel costs
• Insurance premiums
• Monthly car loan payments
• Roadside service membership fees

Use a Car Loan Calculator for New Car Budgeting

While loan terms vary, using a car loan calculator (Opens in a new tab) may help you estimate your monthly payments. It can also help you determine how factors such as your down payment and your old vehicle's trade-in value may affect your loan's terms.

Get an Auto Insurance Quote 

Before you select the make and model of your new vehicle, get an online car insurance quote or contact an American Family Insurance agent for a quote. That information may help you determine how much it costs to protect your new car. 

Our auto insurance is customizable, so you can adjust your policy's coverages based on your needs and budget. For more savings, check out our usage-based auto insurance program, DriveMyWay, and our other car insurance discounts.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

*Customers who bundle home and auto insurance policies may save up to 23% on both policies together (as of December 2023). Discounts may vary by state, property, policy form and company underwriting the home and/or auto policy. Discounts may not apply to all coverages on a home or auto policy.