The 20/4/10 rule is a guideline for buying a car within your budget. It includes a 20% down payment, a four-year loan, and monthly vehicle expenses not exceeding 10% of your income1.
A 20% down payment reduces your loan amount and can potentially lower your monthly payments.
The rule recommends a four-year auto loan to minimize total interest paid3.
This part of the rule suggests that your total monthly car expenses should not exceed 10% of your monthly income.
The 20/4/10 rule promotes responsible financial habits but may not be feasible for everyone, especially those with lower incomes
If the 20/4/10 rule doesn't suit you, consider other strategies like buying a cheaper car or saving more for a larger down payment.