Use the famous 20/4/10 Rule to find a car price that fits your budget perfectly without compromising your financial future.
Buying a car is one of the biggest purchases you will make. It's easy to get distracted by monthly payments and sign a loan that lasts 7 or 8 years, paying double the car's value in interest. The 20/4/10 rule is a conservative framework to keep you safe.
Putting 20% down prevents you from becoming "upside down" (owing more than the car is worth) when you drive off the lot, as new cars depreciate instantly.
If you can't afford the payments on a 4-year (48 month) loan, you can't afford the car. Extending to 6 or 7 years lowers the payment but skyrockets the interest paid.
Your total transportation costs (loan payment + insurance + gas + maintenance) should not exceed 10% of your gross monthly income (or 15-20% of net income depending on your other debts).
