How much car can you afford?
Use the 20/4/10 rule — the most trusted personal finance guideline — to find a car payment that won't stress your budget.
total car price based on the 20/4/10 rule
Comfortable
This car fits well within the 20/4/10 guideline.
The 20/4/10 Rule
The most widely recommended guideline for how much car you can comfortably afford without straining your budget.
Down payment
Put at least 20% down to avoid being upside-down on your loan and to keep monthly payments manageable.
Loan term
Keep your loan to 4 years (48 months) or less. Longer terms mean more interest and a car that loses value faster than you pay it off.
Of gross income
Your total monthly car costs — payment, insurance, and maintenance — should stay under 10% of your monthly gross income.
Buy 1-3 years used
New cars lose 20-30% of their value in the first year. A lightly used car gets you 80% of the experience at 60% of the price.
Get pre-approved first
Walk into the dealership with a pre-approved rate from your bank or credit union. You'll have real leverage to negotiate.
Budget for total cost
Don't forget registration, taxes, maintenance, and gas. A $400/mo payment becomes $600/mo in real cost of ownership.