10 Steps to Finding the Right Car for You
Step 2: How much car can you afford?
Unless you are going to pay cash for your next vehicle, you will need to take out a loan if you're planning to buy. But regardless of whether you will buy or lease your next car, start by determining an affordable monthly payment. A good rule of thumb is that your total monthly car payment shouldn't be more than 20 percent of your monthly take-home pay.
Check the Edmunds.com Car Affordability Calculator to help you estimate your monthly payment by determining the right down payment, interest rate and length of loan. If you run the numbers now, it will show you what you can afford and will also help you control negotiations with the car salesman.
Another valuable tool is Edmunds.com's True Market Value (TMV®) pricing, which shows a fair price for the car you are considering. TMV is the average price that other buyers are paying for the same car in your area. Also, on Edmunds.com you can find local dealers, and check interest rates.