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How Much of a Car Can You Afford to Buy? Udayan Adhye Breaks Down It for You

How Much of a Car Can You Afford to Buy? Udayan Adhye Breaks Down It for You

The 20/4/10 rule advises a 20% downpayment, a 4-year loan, and 10% monthly income for cars, ensuring practical and budget-friendly purchases.

By WHOSTHAT360 Desk | Updated: 10 October 2023 17:47 IST

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Highlights

20/4/10 rule: 20% down, 4-year loan, 10% monthly income for cars.
Income-based: 6L=3L car, 12L=6.2L car, 24L=15L car.
Savings tip: Buy a 3-4-year-old car, and avoid fancy, money-draining ride

Do you know that 20/4/10 rule for buying cars? It's pretty down-to-earth advice to keep your car spending in check without drowning in monthly payments.

So, here's the lowdown: You start by dropping 20% as a downpayment, which is smart because you're not wiping out your savings. Then, you take a 4-year loan. It's not too long, so you're not stuck in car-payment jail forever. And the kicker? You should only shell out 10% of your pre-tax monthly income for those car payments.

Udayan Adhye's Advise:

Now, let's see how this rule applies to different incomes. If you're making 6 lakhs a year, the rule says you can aim for a car worth 3 lakhs. Got a 12-lakh income? You can stretch your car budget to about 6.2 lakhs. And if you're rolling in with 24 lakhs, well, you can comfortably go for a car worth up to 15 lakhs.

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But here's the hack – you can still nab a pretty good car without blowing your budget. Just snag a 3–4-year-old ride that's in good shape. You'll save some serious cash and stick to that 20/4/10 rule. Fancy cars might turn heads, but let's be real, they often turn wallets inside out. Keep it simple and sensible, and you'll cruise without money worries!