What is an Ideal Car Payment?

At Landers Kia in Little Rock, Arkansas, our goal is to break down the car buying process into simple, stress-free steps. We want our customers to always feel informed and supported — even after they drive off our lot. The first (and probably the most important) step in choosing your next vehicle is to determine your budget. If you can’t afford the monthly payment, even your dream car will bring nothing but tension and anxiety! Read on to learn more about car payments and what amount is right for you.

Already Know Your Budget? Start Shopping Here!

Determining a Monthly Payment

There’s no hard and fast rule regarding monthly payments — every individual has a unique financial situation. In the United States, the average monthly payment is $725 for new vehicles and $516 for used ones. However, your payment can vary based on a number of variables. 

Financial experts agree that a good rule of thumb is to spend no more than 10-15% of your monthly take-home salary on a car payment. If special circumstances allow you to save more on your overall budget than most, you can consider spending more than 15% of your salary on a car payment. Do you live somewhere rent-free? Do you forgo costs like cable, streaming subscriptions, or dining out? 

When determining how a new vehicle will fit into your overall budget, don’t forget to factor in additional costs such as gas, maintenance, etc!

What Maintenance Will My Car Need?

Factors Affecting Your Car Payment

As previously mentioned, several factors can impact your monthly payment. One big variable is your down payment — the more money you put down upfront, the less you’ll owe per month. Financial experts suggest putting down at least 20% of a new vehicle’s purchase price and at least 10% for a used vehicle. However, if you can afford to put down more, you’ll save money in the long run. Another factor to consider when it comes to your down payment is your current vehicle’s trade-in value.

See How Much Your Trade-In is Worth

Other loan variables include the interest rate and length of the loan. The interest rate, also known as APR, can fluctuate based on your credit score and debt-to-income ratio. Interest rates can heavily impact your monthly payment, which is why it’s important to keep an eye out for promotions or special offers that can lower your rate. When it comes to the length of your loan, a longer loan means smaller monthly payments but a higher overall cost. The most common loan length is 72 months.

Experiment With Our Payment Calculator

Want to learn more about monthly payments, interest rates, and loan options? Don’t hesitate to contact our Finance Center! Our experts would be happy to answer any questions you may have. At Landers Kia in Little Rock, Arkansas, we’ll work hard to find you the perfect vehicle at the perfect price.