Understanding the 20/4/10 Rule for Buick Financing

July 16th, 2022 by

Here at Joseph Buick GMC, we know that you have so much to consider when you’re in the market for a new car. Beyond the questions of what to look for, you should also consider Buick financing. We can help you determine what’s right for you with a simple equation: the 20/4/10 rule.

What Is The 20/4/10 Rule?

At its most basic level, the 20/4/10 rule is a relative guideline describing the kind of financial resources that a car buyer would ideally have available before leaping into financing a new or quality pre-owned car.

What does it mean? The “20/4/10” stands for a certain group of numbers and factors.

Potential new car buyers should be able to afford the following:

  • Afford a 20% down payment on the vehicle
  • Finance the car for four (4) years or less
  • The cost of this purchase (including insurance and loan payment) should be no more than 10% of the buyer’s gross monthly income

Find Your Financing Route

This formula may not map onto every household or apply seamlessly to every situation, but it’s a good financial rule of thumb. Basically, you shouldn’t buy something you can’t afford.

If you’re ready to consider your options, here are the basics when it comes to different options for financing. Your main routes: direct lending and dealership financing.

Direct lending is essentially a car loan. You as the buyer would borrow the money from a bank, credit union, or finance company.

Dealership financing means the dealership will be financing the purchase.

Both options have their advantages and drawbacks. Find out more about what you should have in place and your Buick GMC financing options and contact Joseph Buick GMC today!

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