You have some financial freedom with a $100k yearly salary, but what kind of car can you afford on that budget?
A $100k salary makes it possible to afford a car loan of up to $36k, based on the commonly used 36% rule,
which multiplies your Salary by 0.36 to come up with a dollar amount you can afford on total debt service, including
mortgage, credit cards, and car loans.
Cars you can afford with a $100k salary, according to the 36% rule, include the Honda CR-V, Subaru Forester,
Volkswagen Atlas, and the Kia Telluride.
Keep reading as we explore the different types of cars within this $100k salary budget and car options for people who
make $60k/year, $75k/year, $120k/year, and other salaries.
What Car Can I Afford With 100k Salary?
A six-figure annual income may lead you to believe you can afford an expensive car, and often people will overspend
or overborrow on a vehicle.
Financers often follow the 36% rule: a
consumer's total debt servicing, including their car loan, credit cards, and mortgage, should not exceed 36 percent of
their total income.
Using the 36% rule, you can calculate how much car financing you can afford.
Calculate Monthly Payments Using The Rule Of 36%
Step 1) Calculate Your Monthly Salary
$100,000 divided by 12 months is a salary of $8333 per month.
Step 2) Calculate 36% Of Your Monthly Salary
$8333 X 0.36 is $3,000.
Step 3) Calculate Existing Debt Servicing Costs
For this example, we'll assume you have a $1700 monthly mortgage payment and a $500 monthly credit card payment which
adds up to $2200.
Step 4) Calculate Available Room For Car Payment
$3,000 minus $2,200 is $800.
From this example, we can calculate that the person in this hypothetical situation can afford an $800 car payment.
However, if the person had $1000 in credit card debt, they would only be able to afford a $300 monthly payment.
This shows the importance of minimizing our monthly payments to give us the most flexibility possible regarding our
finances and purchases.
So using the calculations above, we can finally answer your question.
What Car Can I Afford With 100k Salary?
So let's say you have $2200 in existing debt meaning your max monthly car payment should be no more than $800.
A couple of factors that significantly will impact the monthly payments that we need to keep in mind are the loan
duration and downpayment:
You can afford a 2023 Honda CR-V on a 100k salary.
Of all the new cars currently in this price range, the most popular new cars you can afford on a $100k salary
include:
What Used Car Can I Afford With 100k Salary?
Buying a used car has its benefits and drawbacks. On the one hand, you can purchase a larger, higher quality vehicle
with more options if you buy a used one. However, on the other hand, a used car is usually at least a few years old
with the associated wear and tear.
Also, used vehicle financing is often slightly higher than new vehicle financing.
If you want to keep your monthly payment on your car lower so that you can pay off other debts, the most popular used
cars you can afford on a $100k salary include:
What Car Can I Afford With 200k Salary?
The 36% rule, which states that total debt servicing costs shouldn't exceed 36% of your gross income, also applies to
a $200k annual salary.
Applying the 36% rule to a $200k annual income and a $2200 debt serving costs leaves us with a generous $1600 monthly
auto loan payment.
You can afford a 2023 BMW 5 Series on a 200k salary.
Some new popular car models you can afford on a $200k annual salary include the following:
What Car Can I Afford With 120k Salary?
According to the 36%, the maximum monthly auto loan payment you can pay on a $120k annual salary while servicing
other debt of $2200 a month would be $1400.
With a $120k salary each year and other debt payments of $2200, according to the 36% rule, you would be able to
afford a monthly auto loan payment of $1400. A $1400 auto loan payment would pay for many new cars, including:
What Car Can I Afford With 80k Salary?
Using the 36% rule, an $80,000/year salary and $1500 in other monthly debt payments leave $900 for a monthly car
payment.
You can afford a new KIA Seltos on a $80k annual salary.
Some new car models that you can afford with an 80k salary and $1500 in other debt servicing costs include:
What Car Can I Afford With 75k Salary?
If you make $75k gross income each year and $1500 in other debt servicing costs, you could afford a monthly car
payment of, at most, $750, according to the 36% rule.
You can afford a new Buick Encore on a $75k annual salary.
Some new car models that you can afford with a 75k salary and $1500 in other debt servicing costs include:
What Car Can I Afford With 70k Salary?
With $70k gross income each year and $1500 in other debt servicing costs, you could afford a monthly car payment of,
at most, $600, according to the 36% rule.
Some new car models that you can afford with a 70k salary and $1500 in other debt servicing costs include:
What Car Can I Afford With 60k Salary?
With $60k gross income each year and $1500 in other debt servicing costs, you could afford a monthly car payment of
about $300, according to the 36% rule.
Some new car models that you can afford with a 60k salary and $1500 in other debt servicing costs include:
How Much Should I Spend On Car Payments Based On My Monthly Income?
What you spend on your car payments depends on many factors, not the least of which is your monthly income, but your
ideal car payment also depends on your other outstanding debts, monthly debt servicing fees, and the period of time
you want to finance your car over.
What Is An Ideal Monthly Car Payment?
Ideally, the ideal car payment would be zero, and we should all be working towards that, particularly now that we are
no longer in a zero-percent interest environment.
If we need to finance a car purchase, we should aim to keep our car payments as low as possible while relying on the
36% rule, which, as stated multiple times above, is simply your gross monthly income minus other debt payments
multiplied by 36%.
Financiers often use the 36% rule to calculate the upper limit a client can afford to pay monthly for a car payment.