Car Affordability Calculator

Formula

To calculate the Maximum Value of a Car (MV):

\[ MV = MP \times L - \frac{MP \times I}{100} \times \frac{L}{12} \]

Where:

$MV$ is the maximum value of a car ($)
$MP$ is the maximum monthly payment ($)
$L$ is the length of the loan in months
$I$ is the yearly interest rate of the loan (%)

Car Affordability Definition

Car affordability is the recommended total value of a car that a person can afford based on their income. It considers the maximum amount that can be paid each month towards a specific expense or loan, the length of the loan in months, and the yearly interest rate of the loan.

Example Calculation 1

Let's assume the following values:

Maximum Monthly Payment (MP) = $500
Length of the Loan (L) = 60 months
Yearly Interest Rate (I) = 5%

Using the formula:

\[ MV = 500 \times 60 - \frac{500 \times 5}{100} \times \frac{60}{12} = 29875 \]

The maximum value of the car is $29875.

Example Calculation 2

Let's assume the following values:

Maximum Monthly Payment (MP) = $400
Length of the Loan (L) = 48 months
Yearly Interest Rate (I) = 3%

Using the formula:

\[ MV = 400 \times 48 - \frac{400 \times 3}{100} \times \frac{48}{12} = 19152 \]

The maximum value of the car is $19152.