How Much Car Can You Afford?
Use the golden 20/4/10 Rule of Car Buying to calculate your exact vehicle budget without jeopardizing your financial freedom.
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Estimate your monthly petrol/diesel and prorated insurance costs.
Your Maximum Budget
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Cars in Your Budget Range:
What is the 20/4/10 Rule?
The 20/4/10 rule is a conservative, highly effective financial framework designed by personal finance experts to prevent buyers from purchasing "too much car." Automobiles are depreciating assets; this rule ensures your vehicle serves you, rather than you working to serve a massive auto loan.
20%
Down Payment
Put down at least 20% of the car's purchase price. This protects you from instantly being "underwater" on your loan the moment you drive the car off the dealer lot.
4
Years Maximum
Finance the car for no more than 4 years (48 months). Dealerships will push 7-year loans to lower the EMI, but this forces you to pay exorbitant amounts of interest.
10%
Monthly Income
Your total vehicle expenses (EMI + Insurance + Fuel + Maintenance) should never exceed 10% of your gross monthly household income.
Why Chartered Accountants Recommend This Rule
At BSA & Company, we frequently see businesses and individuals strain their cash flows by over-leveraging on vehicles. By strictly adhering to the 10% income cap, you ensure you still have sufficient liquidity for investments, business expansion, and emergency savings.