Are you searching for a brand-new car with an affordable monthly payment under $300? At McGrath Auto, we make it possible to drive home in a new vehicle while sticking to your budget. With competitive financing and lease options and incredible deals, our goal is to help you find the car that fits your lifestyle and financial needs. In this guide, we'll break down what it takes to secure a $300 monthly payment on a 72-month loan and a 36 month lease.
How much can you pay for a car and be at a $300 Loan Payment?
Around $20,003
How much can you spend on a car to have a $300 Lease payment?
Between $23,000 and $26,000
Loan Payment
To understand how much car you can afford for under $300/month, let's explore the numbers. With a 72-month loan, your monthly payment is influenced by:
- Loan Amount: The total cost of the car after your down payment and applicable taxes.
- Interest Rate: The percentage of interest applied annually to your loan.
- Loan Term: The length of your loan, in this case, 72 months.
We'll use two scenarios-one with a 1.9% interest rate and another with a 3.9% rate-to demonstrate how these factors work together. We'll also calculate the loan amount using a 5% sales tax. Interest rates will vary based on many factors such as the model selected, incentives, your credit history and your equity situation. 1.9% and 3.9% are common rates on new vehicles in this price range for buyers with good to great credit so we will use these rates below but know that your rate could vary.
1.9% Interest Rate
Let's calculate the maximum loan amount that keeps your payment under $300/month at a 1.9% annual percentage rate (APR) for a 72-month loan.
Step 1: Determine the Total Loan Amount (Before Sales Tax)
Using an online loan payment calculator or financial formula, we know that at 1.9% APR, a $300/month payment for 72 months supports a total loan amount of approximately $19,050.
Step 2: Add Sales Tax
Iowa has a 5% sales tax, which is added to the vehicle's purchase price. If we assume a pre-tax price of $19,050, Adding the 5% sales tax brings the total to $20,002.50.
Step 3: Subtract the Down Payment
With a $2,000 cash down payment, the remaining loan amount is:
20,002.50−2,000=18,002.5020,002.50 - 2,000 = 18,002.5020,002.50−2,000=18,002.50 (you do not have to understand this! We can help with all calculations!)
This means you can afford a vehicle priced at approximately $20,003, including taxes, if you want to be at $300 per month in this scenario.
Lease Payment
What Does It Take to Lease a New Car for Under $300 per Month?
Leasing a vehicle is one of the most affordable ways to drive a brand-new car, truck, or SUV. To achieve a monthly lease payment under $300, several factors come into play:
- Lease Term: We're calculating a 36-month lease term, a standard length that balances low payments with practicality.
- Cash Down Payment: Putting $2,000 down upfront helps reduce your overall lease amount, lowering your monthly payments.
- Sales Tax and Fees: In our calculation, we've included a 5% sales tax to provide a realistic estimate.
- Vehicle Cost and Residual Value: The price of the vehicle (MSRP minus discounts and rebates) and its value at the end of the lease (residual value) directly influence your payment.
The Payment Calculation
To determine the vehicle price that keeps your lease payment at $300 per month, let's break down the math step by step:
Budget Breakdown:
- Monthly payment goal: $300
- Lease term: 36 months
- Cash down: $2,000 upfront
Estimating Total Lease Cost:
Leasing typically requires covering the depreciation of the vehicle (price minus residual value) and interest, known as the money factor. For simplicity, assume a money factor of 0.00125 (approximately 3% APR).
Sales Tax and Fees:
Iowa has a 5% sales tax, which applies to the monthly payment.
Vehicle Price Range:
To estimate the MSRP of vehicles that qualify for this payment, we use typical lease formulas. Here's a simplified example:
- Depreciation: Assume the car has a residual value of 55% after 3 years. This means you pay for 45% of the car's price during the lease. For a $25,000 car, that's $11,250 over 36 months.
- Money Factor: Add an estimated financing charge. For a $25,000 car, this might add about $1,200 over 36 months.
- Down Payment Contribution: Your $2,000 upfront payment covers part of the cost, further lowering your payment.
Using this structure, cars with MSRPs between $23,000 and $26,000 often fit within the $300/month budget.
Cars and SUVs under $300 per month in Iowa
With these numbers in mind, you'll find several vehicles that qualify for payments under $300 a month depending on if you lease or finance. From compact cars perfect for commuters to spacious SUVs for growing families, we have options to meet your needs. Some of our featured vehicles include:
