Budget For Your Ford With this Simple 20/4/10 Rule
Saving up for a new or pre-owned Ford is exciting. You set aside some of your income month-over-month until you have enough to shop for that new or used Ford.
Thanks to Ford financing at O’Brien Ford of Shelbyville, you don’t need the entire amount upfront. Instead, follow the 20/4/10 rule when considering your big purchase.
What is 20/4/10 Rule of Car Financing?
The 20/4/10 rule is universal advice from financial gurus that all vehicle buyers should follow to make sure they can afford to pay their car loan with low risk. By following this guideline, you are less likely to get behind on payments or feel overwhelmed by your monthly bill.Rule #1:Pay 20% of the Total Price of the Car as the Down Payment
How much do you have saved for your car right now? If you multiply that amount by five, can you shop for a pre-owned Ford in that price range? Then you have your 20% down payment ready to go!Otherwise, continue to save until you have 20% of the total cost of your dream car. Be prepared to put that down upon signing the loan agreement to relieve a large percentage of the total debt amount upfront.
Rule #2:Take 4 Years to Pay Off the Car Loan
At O’Brien Ford of Shelbyville, we work with Kentucky customers on lease terms that work for anyone, even people working to rebuild their credit. With that in mind, work with one of our friendly finance experts to find a Ford that you can pay off within a four-year term limit.Typical loan terms can range between three and five years. By setting your goal for four years, you will have a more manageable interest rate, and spend less than if you took longer to pay off your loan.
Rule #3: Spend less than 10% of Your Monthly Income on Transportation
This step involves knowing your monthly spending budget. Calculate how much income you bring in each month, then divide it by ten. That is your maximum transportation budget, including your monthly loan payment, fuel, parking, and any other routine costs.Once you have your monthly budget, you can start to shop for vehicles that fit that price range. Use our handy payment calculator to estimate your monthly payment.