Honda Financing: Understanding the 20-4-10 Rule

Purchasing a new car is always exciting, but avoiding spending more than you can afford is essential. At Clinton Honda, we recommend following the 20-4-10 rule when it comes to negotiating your Honda financing terms. Here’s how it works.

20% Down Payment

It’s not advisable to finance the entire cost of a car. Leaving a down payment lowers the money you’ll need to borrow. According to the 20-4-10 rule, you should aim for a down payment that’s at least 20% of the car’s total price, as this will significantly reduce the cost of your monthly loan payments and total loan cost.

Four-Year Loan Term or Less

Your loan term refers to the time you have to pay off your loan. Longer loan terms mean lower monthly payments but accrue much more interest over time. That’s why the 20-4-10 rule recommends that you aim for a loan term of four years or less. Your monthly payments will be higher, but you will pay much less interest.

Total Transportation Costs Under 10%

When it comes to buying a car, the price of the vehicle isn’t the only expense you need to consider. Regular transportation costs such as repairs and maintenance, car insurance payments, and fuel add up to a lot on top of your auto loan. The 20-4-10 rule urges you to keep these costs below 10% of your gross monthly income so you reap the benefits of a loan or lease without burdening yourself financially.

Learn More about Honda Financing in Annandale, NJ

At Clinton Honda, our priority is getting you behind the wheel of a car that works for your lifestyle, even if you are on a budget. Fortunately, the helpful representatives at our finance center are happy to identify your options and arrange a Honda financing plan that meets your needs. Visit our Honda dealership in Annandale, NJ, to find out what we can do for you!

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