How does paying for a car work?
Mia Phillips
Updated on March 19, 2026
A car loan is paid back to the lender in monthly installments called loan payments. Your loan contract is broken down into the principal and interest on the loan, along with any optional add-ins. Longer-term loans, like 60-month or 72-month loans, can make your monthly payment lower.
How much does a car pay monthly?
Car payments and credit scores
| Credit score | Average monthly payment, new car | Average monthly payment, used car |
|---|---|---|
| Prime: 661-780 | $534 | $373 |
| Nonprime: 601-660 | $549 | $382 |
| Subprime: 501-600 | $549 | $398 |
| Deep subprime: 300-500 | $536 | $403 |
How much of your salary should be car payment?
Many financial experts recommend keeping total car costs below 15% to 20% of your take-home pay. So while your car payment is 10% of your take-home pay, you should plan on spending another 5% on car expenses.
Can you finance a car with a new job?
Can a New Employee Get a Car Loan? First of all, you don’t necessarily need to be employed to qualify for a car loan. You can always obtain a car loan irrespective of your employment status, or the job title you hold.
Where can I get help with my car payment?
Ford Credit has a page that lays out options for payment assistance and lease-end options. General Motors (which includes Chevrolet, Buick, GMC and Cadillac) has set up hotlines for owners with questions or concerns about their loans. Honda and Acura are asking owners to contact them in case of financial hardship due to COVID-19.
Do you have to have a job to get a car loan?
Some lenders will require a down payment of 30% or more before granting a loan to someone who is unemployed however. So be prepared to pay a little more for the down payment if you do not have a job or a regular source of income.
What should I do if my car payments are too much?
I only ask to emphasize that your car expense is probably more than half of what you’re spending on housing per month. If you really love the car, then you could consider living in it like this college kid did to recover from his financial sins. His vehicle is a truck and a bit more suitable for sleeping.
How to calculate car payments over the life of your loan?
Use our auto loan calculator to calculate car payments over the life of your loan. Enter your information to see how much your monthly payments could be. You can adjust length of loan, down payment and interest rate to see how those changes raise or lower your auto payments. Vehicle Price Down Payment
