There are many perks to Mazda financing if it’s done right. Lending experts have developed a guideline to help you get the most out of your purchase. Tumminia Mazda outlines the 20/4/10 Rule in detail.
20/4/10 Rule Overview
There are many benefits to financing a vehicle, although it comes with risks. You could end up owing more for your vehicle than it’s worth or with a payment that no longer aligns with your budget. While the 20/4/10 isn’t a set rule, the guideline can help you make a smart financial decision.
The 20
The first part of the 20/4/10 Rule, the “20”, refers to your down payment. As a general rule of thumb, you should aim for a down payment of at least 20 percent. This helps to offset the depreciation that occurs with new vehicles. This way, you don’t end up with negative equity, which is also known as becoming upside down in your loan.
The 4
The “4” is the parameter for your loan term, which is the length of your loan. You should try to limit your loan term to four years, which is often reflected as 48 months. This length is long enough for you to still have comfortable monthly payments but can limit how much interest you must pay. It’s often difficult to structure auto loans to fit this goal, but it’s still good practice to try to stay close to the “4” if you can.
The 10
Finally, the “10” refers to your total auto expenses. You should aim to keep your monthly auto expenses under 10 percent of your monthly income. This amount includes your auto payment, as well as additional expenses, such as your maintenance, fuel, and insurance.
Apply for MAZDA Financing in Olathe, KS
The Mazda financing process is smooth and streamlined at our dealership. Our financial experts are here to help every step of the way. Visit Tumminia Mazda to get started today!
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