Car Affordability Calculator

What is a car affordability calculator?

A car affordability calculator tells you whether a car fits your income. Instead of looking only at the price, it adds up what the car costs you every month, which is the loan EMI plus fuel, maintenance and insurance, and compares that with the share of your salary you are willing to spend. You get a plain answer, and the numbers behind it, before you commit to a loan.

What affects how much car you can afford?

• Monthly income. Your budget starts here. A higher income carries a larger monthly cost.
• Down payment. The more you pay up front, the less you borrow, so the EMI and the interest both fall.
• Interest rate. Even a point or two moves the EMI and the total interest over the loan.
• Loan tenure. A longer loan lowers the EMI but raises the interest you pay in total.
• Running costs. Fuel, maintenance and insurance carry on after the loan is repaid, and they add up over the life of the car.
• Repayment record. A clean record with your bank, as your CIB report shows, helps you get approved and can help you get a better rate.
• Other loans. Instalments you already pay use up part of your income that the car cannot have.

Benefits of using a car affordability calculator

• A realistic budget. You see what the car costs each month, not only what it costs on the day you buy it.
• The cost of the loan. The EMI, the interest and the total you repay, worked out for you.
• Upkeep, not forgotten. Fuel, maintenance and insurance are counted, so they do not surprise you later.
• Quick comparisons. Change the down payment, rate or tenure and the answer moves at once.
• A car sized to your budget. The highest price that fits is shown, so you shop inside it.

1. Monthly budget is your income multiplied by the share you set for the car.
2. Loan is the cost of the car less your down payment.
3. EMI is the monthly instalment that repays the loan with interest over your chosen tenure.
4. Monthly cost of the car is the EMI plus fuel, plus maintenance and insurance spread over twelve months.
5. The answer is yes when the monthly cost is within the monthly budget, and not yet when it is over.

How the EMI is calculated

The EMI is worked out on a reducing balance, the way banks quote a car loan, using this formula:

EMI = P × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]

• EMI is the equated monthly instalment, the amount you pay the bank each month.
• P is the loan: the cost of the car less the down payment.
• r is the monthly interest rate: the annual rate divided by 12 and by 100.
• n is the number of months: the tenure in years times twelve.

The total cost of owning the car is the down payment, plus the loan and its interest, plus fuel, maintenance and insurance across the years you expect the car to last.

Example of using the car affordability calculator

This is the case the calculator opens with, so you can see the same figures on the page above.

The car costs ৳ 44,976 a month against a budget of ৳ 52,500, so it fits with ৳ 7,524 to spare.

How to use the car affordability calculator

1. Enter your monthly income. Use your take-home pay, after tax.
2. Set a budget for the car. Drag the slider to the share of your income you are willing to give it, running costs included.
3. Enter the cost of the car. Use the on-road price, with registration and taxes in it.
4. Set the down payment. Choose the share of the price you can pay up front.
5. Choose the loan tenure and rate. Pick how many years you want to repay over and type the rate your bank quotes.
6. Add the running costs. Enter how long you expect the car to last, your monthly fuel and your yearly maintenance and insurance.
7. Read the answer. The result card says whether the car fits, and the breakdown shows the EMI, the monthly cost and the total cost of owning it.

Tips for using a car affordability calculator

• Count every cost. An EMI that fits can sit beside fuel and insurance that do not. Fill in all of it.
• Try different loan terms. Compare the monthly figure and the total interest, not just the EMI.
• Keep some room. Leave a cushion for repairs, a rise in fuel prices or a month when income dips, instead of using the whole budget.
• Use your bank's real rate. The rate you enter drives the result, so ask for the current offer first.
• Protect your savings. A big down payment is only a good idea if it leaves your emergency savings intact.

Keep reading

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• Compare a mutual fund with FDR, DPS and Sanchayapatra→

Frequently asked questions

What is a car affordability calculator?

A car affordability calculator checks whether a car fits your income. It adds the monthly loan instalment to what it costs to run the car, compares the total with the share of your salary you are willing to spend, and tells you whether the car is within budget.

How much of my salary should I spend on a car?

There is no single right share. A common rule of thumb keeps the whole cost of the car, loan instalment included, within roughly a fifth to a third of take-home pay. The calculator starts at 35% and lets you set your own.

How is the car loan EMI calculated?

The EMI is the loan amount multiplied by the monthly interest rate and by (1 + the monthly rate) raised to the number of months, divided by that same power minus one. The loan amount is the car price less your down payment, and the monthly rate is the annual rate divided by 12.

Which costs does the calculator include?

The down payment, the loan with its interest, and the running costs of fuel, maintenance and insurance over the life of the car. Together they are the cost of owning the car, which is higher than the price on the invoice.

How does the down payment change what I can afford?

A larger down payment means a smaller loan, a lower EMI and less interest. For example, on a ৳ 20,00,000 car, paying 30% up front borrows ৳ 14,00,000, while paying 50% borrows ৳ 10,00,000.

Is a longer loan better?

A longer loan lowers the monthly EMI, which can bring a car inside your budget, but you pay more interest in total. Try several tenures and compare both the monthly figure and the total cost.

What interest rate should I enter?

Use the rate your bank quotes you for a car loan. Rates differ between banks and change over time, so check the current offer before you decide.

What price of car can I afford?

The calculator also shows the highest car price that fits your budget at the down payment, rate and loan term you entered, after setting aside the running costs.

Does the calculator include bank fees, registration and tax?

No. It uses the car price, down payment and costs you enter. If you want fees, registration and taxes counted, include them in the cost of the car.

Is the car affordability calculator free?

Yes. It is free to use and needs no sign-up.