Care Care Tips: Nowadays there is a lot of craze about cars among the youth. Due to the ease of getting car loans from banks, a large number of people are buying cars. But while buying a car, you must keep some things in mind. Because a car is a depreciating asset.
As soon as your car comes on the road from the showroom, its value starts decreasing from that very moment. If you do not use it commercially, then you do not get any income from it. Therefore, the car loan should always be of short duration. A rule is quite popular regarding buying a car. This is the 20/4/10 rule. Let’s know what it is.
What is the 20/4/10 rule?
The 20/4/10 rule is very useful while taking a car loan. This rule tells the customer how much money and for how long he should take a car loan. This rule gives the answer according to the financial condition of the customer. According to this rule, you can buy a car only if you are fulfilling these three requirements:
According to the 20/4/10 rule, while buying a car, you should pay at least 20 percent or more of the amount as down payment. If you can do this, then the first requirement of the rule is fulfilled.
The 20/4/10 rule says that customers should take a car loan for a period of 4 years or less. That is, the maximum loan period should be 4 years. In this way, you should buy only that car whose loan you can repay within 4 years.
The 20/4/10 rule says that your total transportation expenses (including car EMI) should be less than 10 percent of your monthly salary. Transportation expenses include fuel and maintenance expenses in addition to EMI. Now you should buy only that car in which you can fulfill these three requirements. Make as much down payment as possible
If you are going to buy a car, then definitely consider some things, such as – Make as much down payment as possible. You can buy the base model of the car instead of buying an upgraded model, as it will be cheaper for you. Consider the remaining new car inventory from last year, it will be cheaper for you. Keep your current car with you for a long time and save for a new car. You can also buy a used car instead of buying a new car.
