What is the 10 rule for buying a car?

Dealer Right doesn’t only want you to find the car of your dreams but also share some hints as to how to make sure you can afford your car. The "10% rule" for buying a car is a general guideline that suggests your car payment should not exceed 10% of your gross monthly income. This rule is part of a broader financial principle that aims to help individuals manage their finances responsibly and avoid taking on excessive debt.

Here's how it works:

• Calculate 10% of your gross monthly income: Start by determining 10% of your monthly pre-tax income. This amount represents the maximum recommended monthly payment for your car.

• Consider additional costs: Remember that the total cost of owning a car includes more than just the monthly loan payment. You should also factor in expenses such as insurance, maintenance, fuel, and potential repairs.

• Adjust for other debts: Take into account any other outstanding debts you may have, such as student loans or credit card payments. Your total debt obligations, including the new car payment, should ideally not exceed 36% of your gross monthly income.

Following this rule helps ensure that your car-related expenses are within a reasonable portion of your overall budget, leaving room for other essential and discretionary expenses. Keep in mind that personal financial situations vary, and this rule is a guideline rather than a strict rule. It's always a good idea to carefully assess your individual circumstances and financial goals before making a significant purchase like a car. We hope this helps you decide which car from any of the dealerships we market for is right for you. Thank you for reading this weeks blog.

Sincerely, Edson Yanez