Car Loan: What is the 20/4/10 rule in buying a car? All the problems of down payment, tenure and EMI will be removed – what is 20 4 10 rule in car loan

Rule of 20/4/10 will come in handy

Some rules made by financial experts are very popular in money related transactions. There is a similar rule in buying a car. This is the 20/4/10 rule. This rule will also tell you whether the purchase of your favorite car is correct or you should do something else before buying a car.

What is the 20/4/10 rule?

This rule tells you that you can afford a car if you meet these three requirements:
1. While buying a car, you can make a down payment of 20% or more. As per the rule, a customer should pay at least 20% of the amount as down payment while taking a car loan.

2. You can avail a car loan for a tenure of 4 years or less. As per the rules, the loan tenure should be maximum of 4 years.

3. Your total transportation cost (including car EMI) should be less than 10% of your monthly salary. The transportation cost includes fuel and maintenance cost apart from the EMI.

These tips will help you follow the rules:

1. Make as much down payment as possible.
2. Buy the base model of the car instead of buying the upgraded model.
3. Consider the new car inventory left over from last year.
4. Buy a used car instead of buying a new car.
5. Keep your current car longer and save for a new car.