Time for car shopping - max payment question

[disdreamin]

We closed on our refi today and are starting to car shop in earnest.  We're looking at a vehicle loan of somewhere between $15K and $25K and are trying to figure out if it's reasonable to think we could do three years to take advantage of 0% or 0.9% financing that some manufacturers are offering.  If we did this, our payments would be somewhere between $425 and $725.  Is there any easy formula to figure out whether $750 would be too much to realistically be approved for?  A percentage of gross or net pay or something like that?

TIA for any direction on this!  We don't want to plan on buying a $25+K car, do all the research, only to find out we can only get approved for something in the $20K range.  Before we shop in earnest and start making time to do test drives and such, we need a better idea of what our limitations are, financially speaking.

[thrasher865]

I think 10% of gross pay front end and 36% back end.  Or did I mix those up?  Can never remember.

Also, it might be net pay.  I've heard from everyone on here that it's net pay, but all my sources online say gross pay, and 10% of net pay seems a little low.  So all your debts, including this $750 payment, should add up to about 36% of your combined income.  Also, you should make at least 75000 combined.

[disdreamin]

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@thrasher865 wrote:

II've heard from everyone on here that it's net pay, but all my sources online say gross pay, and 10% of net pay seems a little low.  So all your debts, including this $750 payment, should add up to about 36% of your combined income. 

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Thank you for the info!

Yikes!  Well, it might be time to sit down with a calculator then (and Google to look up what front end and back end mean - lol!).   One more question - does the 36% you mentioned include the mortgage payment also?  I'm assuming it does, but boy will that put a tight leash on things, keeping everything under 36%. 

[thrasher865]

Nothing is set in stone, if your scores are good, they may go above that.

36% would include mortgage, installment loans and credit card payments.  Not utility bills or anything that wouldnt show up on your credit report.

10% is for just the loan in question, but that is a low estimate.  I've heard many lenders go up to 14% or higher.  Again, as I'm gearing up to finance a car for the first time, everything I'm saying is just regurgitated from these forums and other websites I've looked at.