Youth Nowadays, there is a lot of craze for cars among the people. Due to the easy availability of car loans from banks, a large number of people are buying cars. But while buying a car, you must keep some things in mind. Because a car is a depreciating asset. As soon as your car comes on the road from the showroom, its value starts decreasing from that very moment. If you do not use it commercially, then it does not give you any income. Therefore, the car loan should always be of a short duration. A rule is quite popular regarding buying a car. This is the 20/4/10 rule. Let us know what it is.
What is the 20/4/10 rule?
The 20/4/10 rule is very useful when taking a car loan. This rule tells the customer how much amount and for how long a car loan should be taken. This rule gives the answer according to the financial situation of the customer. According to this rule, you can afford a car only if you are fulfilling these three requirements:
- According to the 20/4/10 rule, when buying a car, you should pay at least 20 percent or more of the amount as a down payment. If you can do this, then the first requirement of the rule is met.
- The 20/4/10 rule says that customers should take a car loan for a period of 4 years or less. That is, the maximum loan period should be 4 years. In this way, you should buy only that car whose loan you can repay within 4 years.
- The 20/4/10 rule says that your total transportation cost (including car EMI) should be less than 10% of your monthly salary. Transportation cost includes fuel and maintenance cost in addition to EMI. Now you should buy only that car in which you can fulfill these three needs.
Make as much down payment as possible
If you are going to buy a car, then definitely consider some things, such as- Make as much down payment as possible. Instead of buying an upgraded model, you can buy the base model of the car, because it will be cheaper for you. Consider the remaining new car inventory of last year, it will be cheaper for you. Keep your current car with you for a longer time and save for a new car. Instead of buying a new car, you can also buy a used car.
Latest Business News