You just graduated and accepted the job of your dreams. You will be making $4,800 a month and renting an apartment that will cost you $1,030 a month. You have no other debt.

a. What amount can you afford for a car payment?

b. What amount can you afford for a car payment if you also have a student loan payment of $330 a month and credit card payments of $280 a month?

To determine how much you can afford for a car payment in both scenarios, we need to first look at your total income and monthly expenses. Let's break it down step by step:

### a. Without any additional debt
1. **Monthly income** = $4,800
2. **Monthly rent** = $1,030

In this case, your only fixed monthly expense is your rent. To find how much you can afford for a car payment, we can subtract your rent from your income:

\[
\text{Remaining income} = \text{Monthly income} - \text{Monthly rent}
\]
\[
\text{Remaining income} = 4800 - 1030 = 3770
\]

So, you have $3,770 left each month for other expenses, including your car payment. It's typically recommended that no more than 15-20% of your monthly income should go towards a car payment.

To calculate that:

\[
\text{15\% of Monthly Income} = 0.15 \times 4800 = 720
\]
\[
\text{20\% of Monthly Income} = 0.20 \times 4800 = 960
\]

Thus, you can afford a car payment of **$720 to $960 per month** without any other debts.

### b. With student loan and credit card payments
Now, let's account for the additional monthly debts:
1. **Student loan payment** = $330
2. **Credit card payments** = $280

Your total monthly debt in this scenario:

\[
\text{Total debt} = \text{Student loan} + \text{Credit card} + \text{Rent}
\]
\[
\text{Total debt} = 330 + 280 + 1030 = 1640
\]

Now, subtract this total from your income:

\[
\text{Remaining income} = \text{Monthly income} - \text{Total debt}
\]
\[
\text{Remaining income} = 4800 - 1640 = 3160
\]

Similar to part (a), you would want to keep your car payment between 15% and 20% of your income. To calculate that:

\[
\text{15\% of Monthly Income} = 0.15 \times 4800 = 720
\]
\[
\text{20\% of Monthly Income} = 0.20 \times 4800 = 960
\]

However, since you now have less disposable income, you'll want to calculate based on what's left:

\[
\text{15\% of Remaining Income} = 0.15 \times 3160 = 474
\]
\[
\text{20\% of Remaining Income} = 0.20 \times 3160 = 632
\]

Thus, with the added debt, you can afford a car payment between **$474 and $632 per month**.

---

Would you like more details on any part of this calculation? 

### Related Questions:
1. What percentage of my monthly income should go toward savings after all these payments?
2. How would having an emergency fund affect my car budget?
3. How does a down payment on the car impact these monthly payment estimates?
4. What are the pros and cons of leasing a car versus buying in this situation?
5. How would an increase in rent affect the affordable car payment?

**Tip:** Always leave room for unexpected expenses by budgeting below the maximum you can afford!

You just graduated and accepted the job of your dreams. You will be making $4,800 a month and renting an apartment that will cost you $1,030 a month. You have no other debt.

 a. What amount can you afford for a car payment?

 b. What amount can you afford for a car payment if you also have a student loan payment of $330 a month and credit card payments of $280 a month?

Learn how to calculate affordable car payments based on your monthly income of $4,800 and fixed expenses, such as rent, student loans, and credit card payments. This guide walks you through budgeting calculations using percentages of income, with detailed formulas for realistic financial planning.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation