Paying cash for a car is great, but if that’s not possible, follow our 20/3/8 rule for buying a car.
The 20/3/8 rule is simple: on any car you finance, put 20% down, pay it off in 3 years or less, and make sure the monthly payment is 8% or less of your gross income.
The value of a car drops like a rock as soon as you drive it off the lot, so it’s important to make sure you buy a car the RIGHT way. If it isn’t possible to pay in cash, follow our 20/3/8 guidelines to keep your finances on-track.
Also, make sure your car payment doesn’t exceed your monthly investments. We want to make sure your army of dollar bills is still working for you!
The only exception to this rule applies to buying luxury vehicles. For these types of cars, pay cash or pay it off in one year.
Use our car affordability calculator to determine how much car you can afford with the 20/3/8 rule.
Check out the video below to learn more about buying a car with the 20/3/8 rule!
