What is the 20/4/10 rule?

20% down payment minimum; loan term no longer than 4 years; total monthly car expenses including payment, insurance, and gas no more than 10% of gross monthly income.

What do most Americans spend on car payments?

Average new car payment in 2024: $735/month. Average used car payment: $523/month. These are often above the 10% guideline for median income earners.

Should I finance or pay cash for a car?

If you can finance below the expected investment return, such as 0-3% dealer financing vs 7% in index funds, financing while investing the cash is financially optimal. Above 5%, paying cash usually wins.

Car Payment Affordability Calculator

Determine maximum affordable car payment based on income and the 20/4/10 rule: 20% down, 4-year loan, total car expenses under 10% of gross income.

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Frequently Asked Questions

What is the 20/4/10 rule?

What do most Americans spend on car payments?

Should I finance or pay cash for a car?