Payment to Income Ratio

A payment-to-income ratio (PTI) compares your car payment each month to how much you earn.

Step 1: A payment-to-income ratio is calculated by taking your monthly car payment and dividing it by your gross monthly income.

Step 2: The result is the PTI ratio, which will be in the form of a percentage. The lower the PTI ratio; the less risky you are to lenders.

Here's an example: If a borrower's gross monthly income totals $3,000 and their monthly car payment is $400, their PTI is $400 ÷ $3,000, or 13 percent.

Subprime lenders will typically cap a borrower’s PTI ratio at 15-20% of a borrowers gross monthly income.