Car buying · Elgin Auto Sales & Service Center · Elgin, IL
How Much Car Can I Afford? Build a Budget Before You Shop
The car you can afford is the one whose total monthly cost fits your budget, not just the one whose payment fits. The Consumer Financial Protection Bureau says to set a budget before shopping for an auto loan, look past the monthly payment to the total cost of the loan, and count every cost of owning the car. This guide walks through those steps with AAA's 2026 ownership-cost figures and a loan-term comparison.
$12,863AAA 2026 average yearly cost to own and run a new car
$1,072the same cost per month
$4,422average yearly depreciation, the largest cost
about $1,811extra interest, 72 vs. 48 months, in our $20,000 example
The short answer
Start with your monthly budget and work backward. Decide what you can spend each month on the car in total, subtract insurance, fuel, maintenance, registration and other running costs, and what is left is the payment you can carry. Then compare loan terms by total cost, not just payment: a longer loan lowers the payment but usually costs more in interest. AAA puts the 2026 average cost of owning and operating a new car at $12,863 a year, or about $1,072 a month, including depreciation.
Start with a monthly budget
The CFPB's auto loan guide says to have a budget before you shop for a loan, so you choose a loan you can afford and pay on time, and to make sure the budget has room for the loan plus the other costs of owning a car. It adds that you are the best judge of your own financial picture, and points to the federal budget worksheet at consumer.gov to get started.
In practice: list your take-home pay and fixed bills, decide how much is left for transportation each month, and treat that as the ceiling for the payment and running costs combined.
From Take control of your auto loan: A step-by-step guide (CFPB, March 2024), Budgeting for your auto loan, read November 3, 2026.
Costs beyond the payment
AAA's 2026 Your Driving Costs study averages these costs for a new car over five years and 75,000 miles:
| Cost | AAA 2026 average | What it covers |
|---|---|---|
| Depreciation | $4,422 a year | Purchase price minus estimated trade-in value after five years and 75,000 miles |
| Insurance | $2,098 a year | Full coverage, driver under 65 with more than 6 years of experience and no accidents |
| Finance charges | $1,184 a year | 5-year loan, 15% down, national average interest rate |
| License, registration and taxes | $802 a year | Taxes and fees at purchase plus yearly registration (national average) |
| Fuel | 17.3 cents a mile | Regular gas averaging $4.152 a gallon in the 12 months ending May 2026 |
| Maintenance, repair and tires | 11.7 cents a mile | Scheduled maintenance, an extended warranty, wear-item repairs and one set of tires |
| Total | $12,863 a year ($1,071.92 a month) | Average of top-selling new models across seven vehicle categories |
From AAA Your Driving Costs 2026 fact sheet and AAA: New Vehicle Ownership Costs Hit $12,863 Annually (Sept. 15, 2026), read November 3, 2026. AAA's weighted average new-car MSRP in the study is $39,376. A used car usually costs less to buy and depreciates less, but your own insurance quote, mileage and the car's condition decide your numbers.
Vehicle type matters too. AAA's per-mile costs range from about 62 cents for small sedans to $1.10 for half-ton pickups. The CFPB also lists state taxes, title fees and dealer fees at purchase, and insurance, gas, registration, maintenance and repairs for as long as you own the car, as costs to build into your budget.
Loan length changes the total cost
Example: $20,000 financed at a hypothetical 8% APR. This is an illustration of the math, not a rate quote; your rate depends on your credit and lender.
| Loan length | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 36 months (3 years) | $627 | $2,562 | $22,562 |
| 48 months (4 years) | $488 | $3,436 | $23,436 |
| 60 months (5 years) | $406 | $4,332 | $24,332 |
| 72 months (6 years) | $351 | $5,248 | $25,248 |
Calculated with the standard loan amortization formula, rounded to the nearest dollar. Taxes, fees and add-ons are not included.
The CFPB says low monthly payments generally mean a longer time paying back the loan, that longer loans can mean paying more in interest, and that a longer loan puts you at risk of negative equity (owing more than the car is worth) for longer. Our guide to APR vs. interest rate explains how to compare loan offers.
Down payment, trade-in and add-ons
A down payment reduces the amount you borrow, and the CFPB notes that the larger the down payment, the lower the total cost of the loan. Saving for a larger down payment, buying a less expensive vehicle or choosing fewer features and options are the ways it lists to reduce loan costs.
If you are trading in a car you still owe money on, get the payoff amount from your lender first. If you owe more than the car is worth, rolling that negative equity into the new loan could make it much more expensive, because you borrow more than the price of the car. Optional add-ons such as service contracts, GAP coverage and credit insurance raise the amount you borrow if you finance them; the CFPB says their prices are negotiable. Our GAP insurance guide covers one of them.
From Take control of your auto loan: A step-by-step guide (CFPB, March 2024), read November 3, 2026.
A step-by-step plan
Putting the CFPB and AAA guidance together:
- Write down your monthly take-home pay and fixed bills, and decide what is left for transportation.
- Estimate running costs: get an insurance quote, and budget fuel, maintenance, registration and repairs.
- Subtract those from your transportation budget to find the payment you can carry.
- Check your credit report for free at annualcreditreport.com, and get a preapproval or loan quote from a bank or credit union.
- Use the payment, rate and term to work out the loan amount, then add your down payment and trade-in equity to set a price ceiling.
- Compare offers by total cost and APR, not just the monthly payment, and decide on add-ons ahead of time.
These steps are based on Take control of your auto loan: A step-by-step guide (CFPB, March 2024); AAA also recommends a monthly and annual budget that includes ownership and operating costs, and getting preapproved before discussing dealer financing (AAA: New Vehicle Ownership Costs Hit $12,863 Annually (Sept. 15, 2026)). Both read November 3, 2026.
Shopping for a used car at Elgin Auto Sales
Once you have a budget, you can browse our used inventory by price, get a trade-in value with our trade-in form, or apply for financing online and compare it with any preapproval you bring. Our financing page has more.
Elgin Auto Sales & Service Center is at 1200 E. Chicago St. in Elgin. Our sales department is open Monday to Friday 9 a.m. to 7 p.m. and Saturday 9 a.m. to 6 p.m., and is closed Sunday. Get directions.
How much car can I afford FAQ
How do I figure out how much car I can afford?
Set a monthly transportation budget, subtract insurance, fuel, maintenance, registration and repairs, and the rest is the payment you can carry. Use that payment with your loan rate and term, plus your down payment and trade-in, to set a price ceiling.
How much does it cost to own a car per year?
AAA's 2026 study puts the average cost of owning and operating a new car at $12,863 a year, or $1,071.92 a month, over five years and 75,000 miles. Depreciation, $4,422 a year, is the largest piece.
Is a longer car loan a bad idea?
It lowers the payment but usually costs more in total. In our example of $20,000 at a hypothetical 8% APR, a 72-month loan costs about $1,811 more in interest than a 48-month loan. The CFPB also notes a longer loan keeps you at risk of negative equity for longer.
Should I get preapproved before shopping?
The CFPB suggests getting one or more loan quotes from a bank, credit union or other lender before going to the dealership, and AAA also recommends preapproval. It gives you a rate to compare.
Does a bigger down payment help?
Yes. A down payment reduces the amount you borrow, and the CFPB says the larger the down payment, the lower the total cost of the loan.
What costs do people forget when budgeting for a car?
Taxes, title and dealer fees at purchase, and insurance, fuel, registration, maintenance and repairs afterward. AAA also counts depreciation, the value the car loses over time.
Ready to shop within your budget?
Visit us at 1200 E. Chicago St. in Elgin, or browse our used inventory online.
Sources
Budgeting, loan length, down payment, trade-in and add-on guidance are from the CFPB's auto loan guide; ownership-cost figures from AAA's 2026 Your Driving Costs release and fact sheet. Both were read on November 3, 2026. The loan table uses a hypothetical rate to show the math and is not an offer or rate quote. This page is general information, not financial advice. Our address and hours are from our own website, checked the same day. Photo is of our dealership.
- Take control of your auto loan: A step-by-step guide (CFPB, March 2024), Consumer Financial Protection Bureau
- AAA: New Vehicle Ownership Costs Hit $12,863 Annually (Sept. 15, 2026), AAA
- AAA Your Driving Costs 2026 fact sheet, AAA
- Home page: address and sales hours, Elgin Auto Sales & Service Center