Buying a new car in 2024? You need to earn a fat six-figure income to comfortably afford a $50,000 vehicle — here's the math to help drive your decision

It may require a higher income than you'd think

There are different ways to buy a $50,000 car. If you’ve got the savings, you could conceivably pay for one outright.

But let’s assume you’re financing your car, using something known as the 20/4/10 rule. This would have you putting 20% of your car’s purchase price as a down payment, making loan payments for four years and keeping your transportation costs to under 10% of your monthly income.

According to Edmunds, the average annual percentage rate on new-vehicle loans was 7.1% in the third quarter of 2024. Let’s say you have a good credit score and qualify for an auto loan rate of 7%. On a $40,000 car loan, your monthly payments would be around $960, or $11,520 per year. Keep in mind that interest rates can vary based on credit, location, car model and loan amount.

There are, of course, additional expenses. In a study to calculate the cost of owning a new car in 2023, using five-top selling models, the American Automobile Association (AAA) estimated the average cost of licensing, registration and taxes to be $762 per year, or around $64 per month. There's also maintenance, which the AAA put at roughly $0.10 per mile. So, if you drive 12,000 miles per year, that's $100 per month, or $1,200 per year. Finally, there's insurance, which the AAA says costs an average of $1,765 per year, or $147 per month. However, this cost can vary significantly depending on vehicle type, driving record and your age.

So let’s add up our numbers: $11,520 + $762 + $1,200 + $1,765 = $15,247 per year to finance and own a $50,000 vehicle. So, according to the 20/4/10 rule, we’re looking at an annual income pushing $160,000.

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How to keep your car costs down

The income required to own and operate a $50,000 car might seem shocking. And if your earnings are nowhere close, then you may need to take steps to lower your transportation costs.

First, evaluate whether you really need a car at all. Many people work from home at least some of the time these days, and if there’s decent public transportation where you live, you may be able to lead a vehicle-free lifestyle and save a lot of money.

If that’s not an option, skipping some of the bells and whistles offered when you buy a new car could allow you to spend less. You don’t need every feature that’s available. Remember, drivers were capable of parking and changing lanes for decades before there were such things as backing-up and side-view cameras.

Also, shop around for an auto loan where you live, because you never know when one lender might have a better offer than another. And work to boost your credit score to qualify for the most competitive rate you can. You can raise your credit score by being timely with debt payments and keeping credit card balances low relative to your total spending limit. Checking your credit report is also a good idea — just in case there’s a mistake on there that may be dragging your score down.

Finally, don’t neglect costs outside of your car payments. Shopping around for auto insurance could result in savings, as could bundling with a homeowners policy. And don’t run to your dealer every time your car needs maintenance. Unless it’s included for free as part of your purchase, a local mechanic might charge less.