How Much Car Can You Afford?
According to Experian, the average auto loan payment on new and used cars was $745 and $521, respectively, in the first quarter of 2025. Adding that amount to your existing budget is no easy task, not to mention the additional costs for insurance, gas, or maintenance that will come with your new vehicle. To help, we’ve gathered resources and considerations to help you prepare for a new car in your budget.
Estimating Your Auto Loan Costs
Your auto loan costs will vary widely based on a variety of factors. While you might be excited to just get your new car as soon as you can, it’s important to review your loan information and budget beforehand.
We’ve gathered some tips to help you understand your auto costs and bring down the payment on your next vehicle.
1. Put down a Down Payment. Paying more upfront for your car, either with a trade-in vehicle or a large down payment, can lower your loan amount and help you save on your monthly payment and interest charges. The dealership or company you take your trade-in vehicle to will determine the value of your car, but as an additional resource, Kelley Blue Book offers an online tool to help you estimate the value of your current vehicle to get an idea of its worth.
2. Opt for a shorter loan term. Selecting a longer loan term may help reduce your monthly payment and initially seem like the ideal choice. However, it’s important to keep in mind that with a longer loan term, you’ll pay more interest over the life of the loan. Opting for a shorter loan term, if you can afford it, can help reduce your total interest expenses. If you do end up taking a longer term but can afford making additional payments every so often, this can help you pay off your loan sooner and save on the total interest paid.
3. Improve your credit score. The interest rate on your loan will result from your credit score and history. If you have excellent credit, you can expect to receive the lowest interest rate on a loan for your selected term. Locking in at a lower rate will help you pay less interest on top of your loan. View Chaffey’s current loan rates here to narrow down what interest rate you might receive. If your credit score has seen better days, our Journey to a Better Credit Score article can help you take the next step towards a higher score (and more savings!).
4. Consider bi-weekly payments. At Chaffey FCU, you can choose to have your vehicle payments once a month, or to split that amount into biweekly payments instead. When you opt for biweekly payments, you’ll make payments more frequently, but more money will be applied to the principal on your loan, which can help you pay the loan down more quickly. This can also make budgeting easier if the biweekly payments align with your paycheck deposit.
5. Utilize affordable protection plans. While they might bump up your monthly payment slightly, GAP or Mechanical Protection plans can help you save in the long run in the event your car is totaled or needs unexpected repairs. Chaffey FCU offers both of these types of protection plans, at a much lower cost than most dealership plans.
What to Include in Your Vehicle Budget
Determining how much car you can afford requires more than just your auto loan payment. All you need is one trip to the repair shop to throw off your new budget. To make sure you can afford your car before committing to it, be sure to consider these factors:
Car insurance. In California, you’re required to insure your vehicle with Liability Insurance at a minimum. Liability Insurance plans help cover the resulting costs if you are found liable for an accident that results in injury or property damage. There are many other types of auto insurance plans you can add to your vehicle to keep it protected, such as collision insurance, roadside assistance, or personal injury. Before purchasing your new car, it’s best practice to first contact your insurance company to get pricing information for adding or replacing a vehicle on your policy. You can also get a quote on auto insurance from Chaffey FCU’s partner, TruStage.
Gas & Transportation. Transportation costs will vary based on the type of vehicle you are looking for and how much you drive. Researching the fuel efficiency on the vehicles you are interested in can help you estimate how much you’ll need to pay for gasoline. If you opt for an Electric Vehicle, estimate charging prices based on using a personal charging station for at-home usage, versus public charging stations. If electric vehicles are new to your budget, Kelley Blue Book reviews the average costs, time commitment, and types of charging stations to guide your budget.
Maintenance & Vehicle Savings. Your new car won’t need oil changes or new tires each month, but it’s important to consider these additional costs in the overall picture. Setting aside funds each month for regular maintenance or required repairs can make it easier to cover these costs as they arise. On their website, AAA suggests trying to set aside $50-$100 each month into savings for future vehicle maintenance.
Finalize Your budget with an Auto Loan Preapproval
Once you have an idea of what vehicle costs you can afford and are ready to move forward with car shopping, you can apply for your loan to get preapproved before you sign for your new car. This will help you lock in your budget before your trip to the dealership.
How long will my pre-approval offer last? Your auto loan preapproval lasts for 30 days from the date of approval. This means you have about a month to select and sign for your new vehicle. If, after your preapproval, you realize you qualify for a smaller loan than you planned for, or that your interest rate is higher than expected, you have a chance to adjust your vehicle expectations and budget before you commit to your next car.
If you’d like help shopping for your new vehicle, connect with Chaffey FCU’s partner AutoAlliance to find your ideal set of wheels