How Much Car SHOULD You Afford?

A car is designed to get you from point A to point B, and while it might be nice to do that in style, affordability is a better option. 

Conservative: Car value is 25% or less of annual gross income Moderate: Car value is 35% of your annual gross income High: Car value is 45% of your annual gross income

Car affordability options 

Affordable Monthly Car Payments

Ideally, the best rule to follow when buying a car is the 25% gross salary rule, since it is 100% based on what you make each year. However, that doesn’t necessarily help you when it comes to your monthly car payment.   

For that, it’s best to use the “10%” number from the 20-4-10 car buying rule (We will cover the entire rule here in a few).  The 10% number refers to making sure that no more than 10% of your gross monthly income goes towards your automobile costs. 

So at this point, you understand the two most essential rules when it comes to buying cars.  1. Don’t purchase a car valued at more than 25% of your annual gross income 2. Make sure your monthly car expenses and payments are less than 10% of your monthly gross income. 

Follow the 20-4-10 rule when buying a car!

– 20% down on your car purchase – Don’t finance longer than four years or 48 months – Make sure your monthly car expenses (Insurance, payment, gas, maintenance) do not exceed 10% of your monthly gross income. 

The 20-4-10 car buying rule essentially guarantees you will be able to afford your car payment. Here is how it works: 

1. Set a car budget 2. Don’t forget about the “Other” car expenses 3. Do your best to avoid brand new cars. 4. Don’t get caught up with car envy!

4 Tips to Help You Buy A Car You Can Afford

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