When you apply for Subaru financing, you must determine how much of your budget you’ll need to pay for your desired Subaru vehicle. Many drivers typically follow the 20/4/10 rule when creating a financing plan. Tucson Subaru runs down what this rule is and what each number means.
What Is the 20/4/10 Rule?
The 20/4/10 rule is a simple yet effective financing guideline. It’s designed to help people set a budget for the vehicle they want to purchase to determine how much they’ll spend and how long they’ll pay for it.
20-Percent Down Payment
The first component featured in the 20/4/10 rule is your down payment. When you apply for Subaru financing, you should typically make a 20-percent down payment for the vehicle you’re interested in purchasing.
Depending on how much you pay upfront, you can reduce how much you’ll need to finance your vehicle, resulting in lower monthly payments and interest rates. It can also help you reduce the risk of negative equity.
Four-Year Loan Term
Your loan term is another factor that plays a pivotal part in the 20/4/10 rule. A longer loan term results in higher interest rates when financing a vehicle, while a shorter term means higher monthly payments. To balance the two, opt for a loan term of around four years.
10 Percent of Your Gross Monthly Income
When financing a vehicle, you should keep your monthly payments under 10 percent of your gross monthly income. For instance, if your gross monthly income is $6,000, you can expect to pay $600 monthly. This can help you balance your budget for other expenses, such as your home’s utilities.
Apply for Subaru Financing in Tucson, AZ
By following the 20/4/10 rule, you can simplify your Subaru financing process. Visit our Subaru dealership in Tucson, AZ, to learn more from our team of finance specialists. We look forward to speaking with you.
