Understanding the 20/4/10 Rule for Vehicle Financing

If you’re ready to apply for vehicle financing, you need to be sure that the car you choose will fit into your budget. A simple rule, the “20/4/10 Rule” might help. Here’s what it means and how it could help you pick out the right Jeep® SUV or Dodge car at Helfman Dodge Chrysler Jeep® RAM.

What the Rule Means

So the rule is made up of three different parts, and all three help you keep the car you buy within your budget. The “20” is for your down payment. You should be able to afford to pay 20% of the car’s cost upfront. This means financing the other 80 percent with a loan.

Then there’s the “four.” This is for the loan term, or how long you take to pay off your loan. There are longer loan terms available with lower monthly payments, but you end up paying more interest. A RAM truck that you can pay off in four years rather than five or six is probably a better fit for your budget

Finally., there’s the “10.” This is for your monthly payment. You need to do the math and figure out how much of your monthly income your car payment will account for. The goal is to keep it under 10 percent.

Following this rule can help you find a car that won’t overstretch you financially. Remember that the car payment and down payment aren’t the only costs associated with vehicle ownership. You need to have money left over for insurance, maintenance, and all of life’s other expenses too.

Finance a New Car or Truck Today!

If you’re in the market for a new vehicle, visit our Chrysler dealership in Houston, TX. We’ll help you find a model that fits into your budget, and we’re here to answer any of your Dodge financing questions. We hope to see you soon!