Are you ready to purchase a new vehicle? The Honda financial experts at Heritage Honda Parkville recommend keeping the 20/4/10 rule in mind when budgeting for a new vehicle.
What is the 20/4/10 Rule?
The 20/4/10 rule is a budgeting tool, designed by financial experts, to help you make a smart purchase. It includes guidelines for how much you should spend on a new vehicle. This is a beneficial way to set a budget for a new purchase if you’re unsure how much to spend on your new vehicle.
It also outlines the terms to strive for to help you get the most competitive financing options and minimize your interest costs.
What are the Guidelines?
The guidelines are reflected in the numbers – 20/4/10.
- 20 – you should try to make a down payment of at least 20 percent
- 4 – aim to keep your total term (length of your loan) under four years
- 10 – you should try to keep your auto expenses under 10 percent of your monthly income
What if I Can’t Meet These Guidelines?
Think of these guidelines as goals for your new purchase. These aren’t hard and fast rules. Naturally, there are still options for buyers that can’t make such a sizeable down payment or need to have a longer loan to lower their monthly payments.
These are strictly suggestions to help you make the smartest purchase when you buy a new car. Our financial experts are happy to help you find the most competitive loan offers for you with your budget in mind.
Still have questions? We encourage you to visit our Honda dealership near Baltimore, MD, and meet with our team. We’re happy to answer any questions you may have today!
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