Financing can be hugely beneficial for many drivers, if done right. It’s important to set up your loan with the right parameters. That’s where the 20/4/10 rule comes in, which our Mazda financial experts are outlining at Scott Mazda.
What is the 20/4/10 Rule?
The 20/4/10 rule was designed to give car buyers a guideline to follow when financing a new car. However, it’s not necessarily a rule, but more so a tip. This “rule” helps you set up parameters for your loan to help you make the best financial decision.
20% Down Payment
The ‘20’ is the first parameter of the rule. This refers to your down payment. If possible, you should aim to make a down payment of at least 20 percent when purchasing your vehicle. This helps offset the depreciation that occurs when you first purchase a new car, which can help you avoid becoming upside down in your loan. Plus, it will lower the amount you have to borrow, which shrinks your monthly payments.
Four-Year Loan Length
In the 20/4/10 rule, the ‘4’ refers to your loan length. Auto loans can range anywhere from 24 to 84 months total. However, you should aim for a loan length of around four years, if possible. It’s still long enough to keep your payments manageable but keeps your interest costs down.
10% Auto Expenses
The ‘10’ is the final parameter of the guideline. You should strive to keep your auto payments and car-related expenses under 10 percent of your monthly take-home income. You can use our virtual Mazda payment calculator to quickly get an estimate of the monthly payments you can expect.
Apply for MAZDA Financing in Allentown, PA
For assistance navigating your budget and financing terms, contact our expert team. Visit Scott Mazda to apply for Mazda financing today!
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