In this video I answer the question, “How much car can I afford?”
I show you how much you can afford to pay for a new or used car using the 20/4/10 rule. I focus on real world examples to help new and used car buyers set a budget based on their income and ability to make a down payment. Graphs are included so you can see what the car payment will be at any price point.
The 20/4/10 Rule is one budgeting strategy for car buying. The rule of thumb expects car buyers to always put 20% down, pay off the car in 4 years, and never pay more than 10% of gross income towards a car payment. The 20/4/10 rule works for the individual and the household. When you are trying to budget for all the cars in the household you look at their total price combined. The total down payment on all the cars combined should still be 20% of the total price of all the cars combine. Keep all payments to 4 years (per car), and consider total household income to confirm affordability.
A different rule of thumb for car budget based on household income that Dave Ramsey recommends is that the total purchase price of all the cars in the household should not exceed 50% of the household income.
In the video I discuss a few specific examples of the down payment, car payment, and gross income required to buy at several price points:
The graphs discussed in the video are given as examples below. This give you an idea of how car payments and gross income requirements increase relative car price.
What else do you need to know about negotiating the best car price?
You don’t know what you don’t know. On my YouTube channel and car blog I’ve created all the self help videos you need to negotiate the best new and used car prices on your own for free.
But I know people will still pay for help buying a car for 3 reasons:
Save the stress, anxiety, an uncertainty of negotiating on your own
Learn from someone with experience negotiating the best car prices
Save time buying the right car for the best price
If you fall into one of those three categories you can get my car buying help by following this link: https://notwaitingtolive.com/help-buying-a-car/
I recommend the following videos to best negotiate your next vehicle purchase.
How to Make Lowest Initial Offer in Used Car Negotiation
How to Make Lowest Initial Offer in New Car Negotiation
How to Best Negotiate Used Car Price
How to Best Negotiate New Car Price
How to Best Negotiate a Lease
How to Lease a Car (11 Frequently Asked Questions)
How to Negotiate by Email
Cash Buyers Pay More (What to Say to Save Money)
Online Car Buying (How Much Are You Overpaying?)
The Story of the Biggest Discount I Ever Gave As a Car Salesman
How Much Car Can You Afford? (The #1 Rule to Know)
5 Myths About Buying at the Car Dealership
How to Sell a Car For Sale by Owner
Buying a Car Out of State (4 Things to Know Before You Go)
New vs Used vs Very Used (What’s the Real Cost of Ownership and Best Time to Buy?)
Scotty Kilmer 5 Used Cars You Should Buy
What Happens to Unsold New Cars