How to use the Car Affordability Calculator

A simple, step-by-step guide to help you get accurate estimates and make a sensible buying decision.

Quick overview

The Car Affordability Calculator helps estimate the monthly EMI, total ownership cost (including fuel and insurance), and an affordability ratio — how much of your monthly income would go towards the car loan EMI. Open the calculator here: Car Affordability Calculator.

What you need before you start

  • Annual income (gross)
  • Expected down payment percentage
  • Expected on-road price (ex-showroom price + road tax + other costs)
  • Loan tenure (years) and expected interest rate (% p.a.)
  • Approximate annual insurance cost
  • Estimated monthly driving distance, expected mileage (km/l) and current fuel price (₹/litre)
  • How long you plan to keep the car (lifespan in years)

Step-by-step

  1. Open the calculator — go to the calculator page and scroll to the calculator card, or click here: Open calculator.
  2. Enter Annual Income — put your total yearly income before taxes in the field labelled "Annual Income". The calculator will use this to compute your monthly income and affordability ratio.
  3. Income Tax — if you don't know exact tax, you can leave it as 0; the calculator will assume no tax. To be conservative, enter an approximate tax amount you currently pay per year.
  4. Price and On-road costs — enter the car's ex-showroom price in the field labelled "Price (Ex-Showroom)" and add expected Road Tax + Others (registration, road tax, handling, accessories). Together these form the on-road price.
  5. Down Payment (%) — enter the percent you plan to pay upfront. Higher down payment reduces loan amount and EMI. We recommend at least 20% to keep EMI manageable.
  6. Loan Tenure — choose number of years to repay the loan. Shorter tenures lower total interest but increase EMI; longer tenures lower EMI but increase total interest paid.
  7. Interest Rate (% p.a.) — enter the approximate annual interest rate your bank or lender charges. Use the expected rate after offers/negotiation.
  8. Insurance — enter your expected annual insurance premium (comprehensive). This contributes to total ownership cost.
  9. Fuel assumptions — add Monthly Distance (km), Mileage (km/l), and Fuel Price (₹/litre). The calculator estimates fuel spend over the car lifespan using these.
  10. Car Lifespan — choose how many years you intend to keep the car. This is used to project fuel costs over ownership duration.
  11. Calculate — click the Calculate button. The results panel will appear showing key numbers.

Reading the results

After calculation, the results card shows these labeled values (look for the same labels on the right panel):

  • Affordability Ratio — shown as "Affordability Ratio" on the results card. This is the % of your monthly net income that would go to EMI. Guidance used by the tool:
    • <= 15% — Affordable
    • 15%–25% — Stretching
    • > 25% — Not affordable
  • Monthly EMI — look for the value labeled "Monthly EMI"; it is computed using the standard EMI formula.
  • Fuel Cost (Over Lifespan) — shown as "Fuel Cost (Over Lifespan)"; the estimate totals fuel spend across your planned ownership period.
  • Total Ownership Cost — shown as "Total Ownership Cost"; this sums the on-road price, fuel cost and insurance over the lifespan you entered.
  • Verdict & Tips — short, plain-language advice appears under the headings "Verdict" and "Tips".

Practical examples

Example 1: If your monthly net income is ₹50,000 and EMI is ₹7,500, affordability ratio = 15% — comfortable.

Example 2: If your monthly net income is ₹40,000 and EMI is ₹12,000, affordability ratio = 30% — too high; consider increasing down payment or choosing a cheaper model.

Common mistakes to avoid

  • Ignoring on-road costs — registration and handling can add a large chunk to the sticker price.
  • Underestimating fuel usage — be realistic about how much you drive.
  • Using optimistic interest rates — base calculations on the rate you expect to get realistically.
  • Not accounting for other monthly obligations — EMIs for other loans or ongoing commitments reduce what you can comfortably afford.

Next steps after you calculate

  1. If verdict is Affordable, still check insurance and maintenance costs and plan for emergency fund equal to 3–6 months of expenses.
  2. If Stretching, try increasing down payment or extending tenure slightly and re-check total interest impact.
  3. If Not affordable, pick a lower priced car or postpone buying until you can raise a larger down payment.

Need help?

For general guidance, consult a financial advisor before taking a big loan.

Published: 19 August 2025 • Author: HeroZero