The Real Monthly Cost Of A New Car

During a recent car buying experience my wife asked me, “Can we afford this?” We were both staring at the monthly payment we would be responsible for, but the answer is trickier than a single number on a loan document. Several things must be considered when determining if a new car is affordable.

Not Just A Monthly Payment

Most importantly, do not fall for the most common trick of car salespeople. They ask what monthly payment you’re looking for, then adjust the term of the loan to match that payment. Before looking for a new vehicle, decide not only what monthly payment you can afford but also what loan term you’re looking for. Stick to what you’ve decided.


The automobile loan is not the only monthly payment to consider. Insurance rates vary based on vehicle type, your location, and even color. Before making the final decision on a car, find out the monthly insurance cost for you potential new vehicle. Do not get less coverage than you normally desire just to make the car more affordable.


Driving your new vehicle will require gasoline. Calculate your new monthly fuel charge by taking the estimated miles per month you drive divided by the mpg rating (use the in town rating for worse case scenario) and multiply by the current price of gasoline per gallon. You should have a good idea how much you spend on gasoline per month with your current vehicle.

Add these three amounts together for both your current car and your potential new ride and calculate the difference between the two.

In my specific case our monthly amount was going up by quite a bit. We had paid off our previous vehicle, so the new monthly loan payment was a significant addition to our monthly bills. While our gasoline bill decreased slightly as we downsized from a van to a small SUV, our insurance cost went up a little too.

Using these values my wife and I were able to see the true monthly cost if we were to buy the vehicle and make an educated decision as to whether we could afford it.

How about you, EOD Nation, do you take into account all these things when deciding if you can afford a different vehicle? Are there any additional charges that should be added?

About Travis

Leave a Comment...


This site uses Akismet to reduce spam. Learn how your comment data is processed.