Here at Tumminia Mazda, we sell a wide selection of new and pre-owned Mazda vehicles. But before you can get behind the wheel of a new vehicle, the first step is figuring out a way to pay for it. While some drivers choose to pay in cash, the majority opt to take out a Mazda financing plan at our Mazda finance center.
One helpful rule that many buyers abide by is the 20/4/10 rule of financing. Our finance professionals are happy to explain how it works.
How Does the 20/4/10 Rule Work?
The 20/4/10 rule uses simple math to help car buyers figure out their financing budget. According to the formula, you should make a 20 percent down payment on a car with a four-year car loan and then spend no more than 10 percent of your monthly income on transportation expenses. This 10 percent includes things like:
- Auto loan payment
- Maintenance
- Gas
- Car insurance
Here is an example of the 20/4/10 rule in a practical application. A person making the 2020 United States median annual income of $67,521 should aim to spend less than $675 per month on transportation costs.
Why Does This Rule Work?
For most people, the 20/4/10 rule works because understanding your budget in advance gives you more negotiating power when you’re shopping around. In addition to following this general rule, it is also important to know your credit score before visiting our Olathe, KS Mazda dealership. If you have a high credit score, it is more likely that you will be approved for a loan at a lower interest rate.
Talk to a friendly Mazda finance professional at Tumminia Mazda to learn more about the 20/4/10 rule for Mazda financing.
