Buying a car is a big financial obligation, so it’s smart to do some planning ahead of time. Following the 20/4/10 rule can help you do this, giving you a framework for your down payment, loan term, and monthly income. Here our Subaru finance center explains what the 20/4/10 rule entails.

Down Payment

It’s a wise idea to supply as much as you can for the down payment, and this should be at least 20 percent. When you do this, right away, a good chunk of the sale price is removed, which means that you won’t need to borrow as much for your loan.

Loan Term

The length of your car loan can vary quite a bit. It could be as short as 12 months or perhaps as long as 84 months. But 4 years is the sweet spot, as this should result in affordable monthly payments. If you go much shorter, those payments will be a lot higher. Much longer than four years, and the interest starts to add up.

Monthly Income

Ideally, you shouldn’t be spending more than 10 percent of your income on your car payments. When you figure out what this is, you will have a good idea of what kind of car you will be able to afford. It’s important to note that 10 percent encompasses all transportation costs, including gas and insurance, as well as car payments. 

Make the Right Financing Choices at Lester Glenn Subaru

Financing can be a little tricky, especially if you’ve never done it before. At Lester Glenn Subaru, we aim to make the process as simple and as straightforward as possible. You can get things started by filling out our online financing application. Contact us today and get behind the wheel of a new Subaru vehicle!