Home » How Much Car Can I Afford (20/4/10 Rule) finance car

How Much Car Can I Afford (20/4/10 Rule) finance car

by haisanPHANTHIET



If you’re in the market to buy a car, you might be asking yourself “how much car can I afford?”. In this video I teach you the 20/4/10 Rule which is a great rule of thumb to understand how much car you can actually afford.

Cars are a big financial decision that most of us have to make, and it’s smart to go into a car buying situation knowing exactly how much you can truly afford. This video will help you do that.

Although I still prefer to buy cars cash, I think that the 20/4/10 Rule is a good starting point for someone to decide if a car is affordable or not related to their income and budget.

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38 comments

Marko - WhiteBoard Finance 10/12/2021 - 4:12 Chiều

Real men wear pink.

Reply
Ryan Hsu 10/12/2021 - 4:12 Chiều

Man I got myself a 2021 M6. Cost me 25% of my income. Paid 25% down payment. Let’s see if I did this wrong.

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derek mcculler 10/12/2021 - 4:12 Chiều

25,000+ 3100 = $28,100 He has in the car
25,000+1978= $27,000 he has on the car.
He’s paying 1100 more as a conscience fee of not having a down payment. I’d rather pay that then be out $5,000. That’s money I can be investing. That’s not what I would recommend but both scenarios are respectable

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Duce 10/12/2021 - 4:12 Chiều

Idk man ive been driving cheap, crappy beaters my whole life & let me tell ya. Im really tired from the anxiety of not knowing wether or not my car is gonna start up, or wether or not its gonna die in an intersection.

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Randa O 10/12/2021 - 4:12 Chiều

Good video for sure. In an ideal situation a person will buy a slightly more expensive vehicle (not a beater) with cash and drive it for 4 or 5 years. Then save the monthly payment of $458 and invest in an index fund. But I do get the point of delayed gratification. Thanks for the vid.

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RoIIingStoned 10/12/2021 - 4:12 Chiều

You’re telling me I can afford a used Civic??? 😍😍😍

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Burundi initiative 10/12/2021 - 4:12 Chiều

Best explained

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Hannah Anderson 10/12/2021 - 4:12 Chiều

PAY CASH OR GO CARLESS AND FIGURE. IT. OUT!!

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Kenjie Kenjie 10/12/2021 - 4:12 Chiều

Damn. This won’t even help people who’s not even making 60Gs/year.

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N Diesal 10/12/2021 - 4:12 Chiều

i disagree with buy car cash. Why put up 20k when you can finance it for 2-3% then make over 6% on that 20k

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Yeshu Aggarwal 10/12/2021 - 4:12 Chiều

Auto loans are stupid! Buy a car in cash (where it is not more than 50% of your total income you make in a year) and be debt free!

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Pasha Hillyard 10/12/2021 - 4:12 Chiều

Who cares if the interest rate is higher if your monthly payment is lower? I invest week to week, I don't get paid once a year

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Abhyudaya Gupta 10/12/2021 - 4:12 Chiều

Hi Marko – what is the math behind the $468/ month and $3100 in interest payments that you have calculated.

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S. S 10/12/2021 - 4:12 Chiều

So who's paying the Sales taxes on the 25,000? That's another $1500 you have to put down or roll into the loan if 6% tax rate.
Tag fee? Could be up to $500 in some states. Title fee though small counts too. What about the Warranty price? Or do you have the $5k when your engine goes? Required Full coverage insurance is another $200 a month average, another $50 a month for basic maintenance. And anywhere from $200 to 600 monthly for gas.
Is the real cost of owning a car is more like 25% of people's income.

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Alvonte Rogers 10/12/2021 - 4:12 Chiều

What if you can get 72 months at 0%

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Grant V 10/12/2021 - 4:12 Chiều

What will 25k buy in 2022? Not much

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iconic08 10/12/2021 - 4:12 Chiều

Hey Marko does it apply in current situation

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Andrew Rawlings 10/12/2021 - 4:12 Chiều

I didn't follow the 20/4 rules. I bought a brand new car almost 11 years ago and put zero down, financed for 5 years (0.9%). Still driving it and it will easily last another 5 years and probably 10 years if i decide to keep it that long. I have had very few repairs outside of routine maintenance.

While it's the last number, I see the 10% rule as the most important provided you keep the car for a long time and have a low interest rate. I was always under 10% of my income for car expenses and I figure much lower than that now.

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GoodrumMC 10/12/2021 - 4:12 Chiều

Keep in mind the guy who broke the rule is actually doing pretty good if you consider inflation. He had a great car up front without loosing cash. Although this move is still expensive 27k. The 10% rule now that is a must in my opinion

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Keiyon Monroe 10/12/2021 - 4:12 Chiều

What about when buying more expensive cars? Same concept?

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CHRIST SET 10/12/2021 - 4:12 Chiều

in the UK, this are the things u pay for , for owning a car even though u work from home
Insurance when u claim insurance is still goes up
MOT
Roadtax
Congestion charge
Camera hidden on tress speeding ticket
Toll gate
Car service when things go wrong
Parking ticket
petrol
car wash
incase some one bugled your car
Is like we dont stand a chance. thanx to Uber availability.

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Joshua Little 10/12/2021 - 4:12 Chiều

Lost on this one. Why spend 20% upfront (that I could invest somewhere to grow that money), to pay $10 less per month, and ~$1k increase overall?

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Abdu Q 10/12/2021 - 4:12 Chiều

"waited 4 years to buy $22k, price inflated 6.5 % ..might as well just take the loan"

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tipsy09 10/12/2021 - 4:12 Chiều

buy a 5k beater and spend 2k a year on repairs

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Zvala 10/12/2021 - 4:12 Chiều

Holy, according to this. I can't afford sht 😀

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Luca Nicolas Stefan 10/12/2021 - 4:12 Chiều

Or.. just invest the 5k downpayment outright and get 5 years in the market for it?

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A W 10/12/2021 - 4:12 Chiều

4 years is no small time

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Biffcheese Spinoccoli 10/12/2021 - 4:12 Chiều

John makes 60k. If John makes 46k, but car prices are skyrocketing, this scenario looks much more bleak.

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Donald Slump 10/12/2021 - 4:12 Chiều

That’s if the beater doesn’t start smoking on the way to work then your late and your boss fired you 🤣

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Keith Pierce 10/12/2021 - 4:12 Chiều

Great video

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Anil Pai 10/12/2021 - 4:12 Chiều

The cost of owning a USED car in Toronto is as below.

Car – Toyota RAV4
Model – 2016 – I bought it from the owner in sept 2021.
Price – 18,000
Insurance for the first 2 year- 6,800/- per year (G2 license)
Insurance from third year – 4800 per year (G license)

Estimated fuel cost – 2,400 per year
Estimated Maintenance – 2600 per year

Cost of owning the car for 4 years is approx 61k for 4 years i.e 15.25k every year

This is assuming u pay upfront for the car without financing 🙄🙄

Monthly cost $1300 to own a used car worth 18k in Toronto..

I better be earning at least 10k a month 😥

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Alex Cetina 10/12/2021 - 4:12 Chiều

More like majority of people see the savings and dig into it. It all depends what you want most cars are not coming out to 25g or 30 , unless you want to roll in a Hyundai ..damm I think Hyundai's are like 40 now ..lol 🤦‍♂️

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Daniel Feldman 10/12/2021 - 4:12 Chiều

Some people live to drive a nice car. For some it’s just transportation. Find something better to live for.

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Mileycywus kleiner 10/12/2021 - 4:12 Chiều

Yo can you make an example for someone who makes 25k a year

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Roof1975 10/12/2021 - 4:12 Chiều

I took a different approach. Bought my new 2002 Civic, financed.
Kept it for 20 years lol. That's how I roll lol. Next year will get a new 2022 civic and repeat.
20 years… I kept this thing going.

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MuttonChops24 10/12/2021 - 4:12 Chiều

the scenario in the video, is that $60,000 gross or net income? i gross $68k but my net is only about $51k. im not sure which number to use in my calculation.

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Morgan Gregory 10/12/2021 - 4:12 Chiều

Question about the 4 – what if you can secure 0% for 5 years? Doesn’t that make sense?

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Kevin 10/12/2021 - 4:12 Chiều

Nobody ever taught me this stuff. I can only afford $5k but my family is trying to convince me it's better to finance a new car… I had an inkling that's a dumb idea but you laid it all out clearly! Thank you Marko, I'll be buying the most reliable $5k shitbox I can find.

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