At McGrath Auto, we understand that affordability is a top priority for many car shoppers. That's why we offer a wide selection of new cars with payments under $400 per month. Whether you're searching for a compact car, a fuel-efficient sedan, or a versatile SUV, we're here to help you find the perfect vehicle that fits your budget.
To make informed decisions, it's important to understand how your monthly payment is calculated. Below, we'll break down what it takes to get a car loan with a monthly payment of $400 or less, assuming a 72-month loan term, a $2,000 cash down payment, and a sales tax rate of 5%. We'll run the numbers at two common interest rates: 1.9% and 3.9%. Your exact interest rate will vary and we have many vehicles that qualify for 0% financing, and some that will be above 3.9%. For these calculations we went with two common interest rates that are available on many vehicles at the time of this article being written. Please contact McGrath Auto to determine what your exact interest rate will be.
How Car Payments Are Calculated
Monthly car payments depend on several factors:
- Loan Amount: This is the vehicle's price after subtracting your down payment and adding applicable taxes and fees.
- Interest Rate: The annual percentage rate (APR) affects the cost of borrowing money.
- Loan Term: Longer terms, such as 72 months, lower monthly payments but may increase overall interest costs.
- Sales Tax: This is applied to the vehicle's purchase price and varies by location.
- Down Payment: For this example we are using $2,000 cash down. That amount can vary and while it is possible to get a low with $0 down, we encourage you to put some money down. The banks like to see it, it lowers your payment, and it keeps you in a better equity position.
We'll use these factors to show you the price range for a vehicle that can fit within a $400/month payment.
Scenario A
3.9% Interest Rate allows you to buy a $25,620 vehicle and have a $400 payment.
Key Assumptions:
- Loan term: 72 months
- Down payment: $2,000
- Sales tax: 5%
Step 1: Reverse-Calculate the Loan Amount
To find the loan amount, we first determine the monthly payment formula for car loans:
M=P⋅r1−(1+r)−nM = \frac{P \cdot r}{1 - (1 + r)^{-n}}M=1−(1+r)−nP⋅r
Easy peasy! Just kidding, we can help with all calculations so you are not having to understand formulas like that.
Step 2: Add Sales Tax and Subtract Down Payment
Now, let's calculate the total vehicle price:
- Sales tax: 5%
- Subtract the $2,000 down payment.
Using this formula, the maximum vehicle price before tax is:
- Total vehicle price allowed to be at or below $400 is $25,620 assuming you have a 72 month loan with 3.9% interest, $2000 down and 5% sales tax. (you will still have smaller fees that you can pay out of pocket or work into the loan: registration, doc, title Fee)
Scenario B
1.9% Interest Rate allows you to buy a $26,190 vehicle and have a $400 payment.
Lower interest rates mean lower borrowing costs, allowing for a higher-priced vehicle with the same monthly payment. Let's repeat the calculation for a 1.9% APR.
Key Assumptions:
- Loan term: 72 months Down payment: $2,000 Sales tax: 5%
Calculating the maximum vehicle price before tax:
- Price before tax = Loan principal / 1.05 = $25,400 / 1.05 ≈ $24,190
- Total vehicle price = $24,190 + $2,000 = $26,190
Result for 1.9% APR:
At 1.9% APR, with a $2,000 down payment, you can afford a new car priced at $26,190 or less while keeping your monthly payment under $400. (assuming you have a 72 month loan with 1.9% interest, $2000 down and 5% sales tax. You will still have smaller fees that you can pay out of pocket or work into the loan: registration, doc, title Fee)
Why Choose McGrath Auto?
At McGrath Auto, we offer a wide variety of vehicles that fit any lifestyle and budget. Here's why car buyers trust us:
- Affordable Options: With many vehicles priced to keep payments under $400/month, you'll find a car that fits your financial goals.
- Competitive Financing: Our finance team works with multiple lenders to secure the best interest rates, whether it's 3.9%, 1.9%, or even lower for qualified buyers.
- Top Brands: Choose from a diverse inventory of cars, trucks, and SUVs from brands you know and trust.
- Exceptional Service: Our team is here to guide you through every step, from browsing our inventory to finalizing your purchase.
Your exact interest rate will vary and we have many vehicles that qualify for 0% financing, and some that will be above 3.9%. For these calculations we went with two common interest rates that are available on many vehicles at the time of this article being written. Please contact McGrath Auto to determine what your exact interest rate will be.
Example Vehicles Under $400 Per Month
Here are just a few models that might fit your budget, depending on your preferred loan terms and interest rates:
A stylish SUV with impressive fuel efficiency and modern features. 
A crossover with a powerful appearance and great technology.
A compact SUV perfect for urban driving and weekend getaways.
A reliable sedan packed with advanced safety technology. 
A versatile, fun-to-drive sedan that is becoming very popular.
A crowd favorite! Reliable crossover with impressive storage space.
A broad and reliable sedan with a solid history and loyal owners. Also on the list are the Hyundai Kona, VW Taos, Kia Seltos, Chevy Malibu, Dodge Hornet and Kia Forte.