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How Much Car Can I Afford?

See how much car you can afford from your take-home pay: the price a monthly payment buys with your down payment, trade-in, car loan rate and GST, HST or PST.

$

A month, after tax

%

$420 a month

$
$

What your car is worth

%

A year

For GST, HST or PST

More options· $350 running costs
$

A month: insurance, fuel or charging, repairs

$

Registration and dealer fees

You can afford a car up to

$22,513

With $4,000 up front and $420 a month for 5 years at 6.55%

You borrow
$21,440
Interest
$3,760
Tax
$2,927

With running costs, the car would cost you $770 a month, 18% of your take-home pay.

What this means

A common guide is to keep car payments to about 10% of your take-home pay, and everything the car costs, with insurance, fuel and repairs, under about 20%. A car loses value from the day you buy it, so the less of your income it takes, the more is left for things that grow.

A shorter loan costs less interest and means you won’t owe more than the car is worth. Stretching to 7 years lowers the payment but adds interest, and you may still be paying when the car needs costly repairs. A good used car can cost far less for the same payment.

Next step

How it adds up

You borrow$21,440
Up front$4,000
Less sales tax−$2,927
Car price$22,513
Total interest$3,760
Everything you pay$29,200

Where the money comes from

Paying for the car
  • Down payment$4,000
  • Loan$21,440
Assumptions in this estimate
  • A fixed-rate loan repaid monthly, with the down payment and trade-in paid towards the car. The starting rate is a typical one: Chartered banks’ average rate on new auto loans was 6.55% in June 2026 (Statistics Canada).
  • GST, HST or PST is charged on the full price; some provinces tax only the price after the trade-in.
  • Your actual rate depends on your credit, the lender and the car’s age. Dealers may offer lower rates on new cars, sometimes in place of a discount.
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How the calculator works

  1. Your payment: a share of your take-home pay, 10% to start.
  2. What it borrows: the loan that payment repays over the term, at the rate you enter.
  3. The car price: the loan plus your down payment and trade-in, less sales tax and fees.
  4. All car costs: the payment plus insurance, fuel and repairs, as a share of your pay.

Example

On take-home pay of $4,200 a month, 10% is a payment of $420. Over 5 years at 6.55%, with a $4,000 down payment, that buys a car of up to $22,513, and you’d pay $3,760 of interest. In Ontario, $2,927 of the budget goes on 13% HST.

Ways to afford a better car

  • Save a bigger down payment: every $1,000 more adds $1,000 to the price without adding interest.
  • Improve your rate: compare a bank or credit union loan with the dealer’s offer before you go.
  • Look at nearly new: a car a few years old has already lost much of its value.

Learn more

See our car loan calculator for the payments on a particular car, the lease vs buy calculator, and the budget calculator.

Last updated

Frequently asked questions

How much should I spend on a car?

A common guide is to keep car payments to about 10% of your take-home pay, and everything the car costs, including insurance, fuel and repairs, under about 20%. On $4,200 a month, that’s a payment of up to $420.

How long should a car loan be?

As short as you can manage. A 3 or 4-year loan costs much less interest than 6 or 7 years, and you’re less likely to owe more than the car is worth if you need to sell it.

Is sales tax included?

No: car prices in Canada are quoted before GST, HST or PST. Choose your province and the calculator takes the tax out of your budget. In BC, PST on vehicles rises above $55,000.

Is it better to buy a new or used car?

A car loses a large part of its value in its first few years, so a good used car can cost far less for the same monthly payment. New cars often come with lower dealer finance rates and a warranty, which can narrow the gap.