Rachana Phadke Ranade's 20-4-10 Rule: A Smart Guide for Car Buyers

Are you looking to purchase a new car? Not too long before that fateful decision, finance expert Rachana Phadke Ranade has a golden rule to help you budget wisely. It's called the "20-4-10" Thumb Rule.

Let us now break it down very easily:

1. Down Payment – 20%

The first step is the down payment. Ideally, you should pay 20% of the car's on-road price as a down payment. This shows you can manage a portion of the cost upfront without fully relying on loans.

For example, if your car's on-road price is ₹10 lakhs, then your down payment should be at least ₹2 lakhs.

2. Loan Tenure: 4 Years

The second is the loan tenure. Try to pay the car loan within 4 years. The longer it takes, the lower your EMI, but it would increase your interest burden. Keep it short and manageable.

3. EMI Limit: 10% of Income

Lastly, check your monthly EMI. Your monthly EMI should not exceed 10% of your monthly income. This would ensure that your car loan does not strain your budget or interfere with other financial goals.

For example, if your monthly income is ₹50,000, your car EMI should not exceed ₹5,000.

View this post on Instagram

A post shared by Rachana Phadke Ranade (@ca_rachanaranade)

Why You Should Follow This Rule?

This rule ensures that:

• You don't burden your wallet with unnecessary burdens.
• You buy wisely and without too much stress.
• Keep room for other expenses and savings.

Apply the "20-4-10" rule to your calculations before visiting the showroom. It's easy and efficient, and your ideal car won't become a financial nightmare!