Life Event
The car buying budget: price is only the first line
The sticker price is the smallest part of the car's true cost. Tax, registration, insurance, fuel, maintenance and depreciation decide what you can actually afford. The 20/4/10 rule (20% down, 4-year loan, 10% of income) is the guardrail — and the dated budget is the reality check.
- Total cost of ownership
Price + tax + insurance + fuel + maintenance + depreciation.
- The 20/4/10 rule
20% down, 4-year loan, total car costs under 10% of income.
- Dated purchases
Buying is a dated event — the budget shows the months it can absorb.
- Depreciation truth
A new car loses 20–30% in year one; the budget should price that in.
The true monthly cost
| Line | Example |
|---|---|
| Loan payment | $380 |
| Insurance | $120 |
| Fuel | $140 |
| Maintenance + tires | $60 |
| Registration | $20 |
| Monthly total | $720 |
The 20/4/10 rule, decoded
- 20% down payment minimum — negative equity is a trap.
- 4-year loan maximum — longer means paying for depreciation.
- 10% of take-home for all car costs combined — the affordability ceiling.
Running the dated check
Project the purchase month on a calendar: down payment, first payment, insurance premium, and the registration date.
If the projection dips negative in the purchase month, the car is not affordable yet — delay, downsize, or raise the down payment.
Frequently asked questions
How much car can I afford?
The 20/4/10 rule: 20% down, a 4-year loan, and all car costs under 10% of take-home income. Then verify the purchase month on a dated budget.
What is the real cost of owning a car?
Beyond the payment: insurance, fuel, maintenance, tires and registration typically add 40–80% on top of the loan payment.
Should I buy new or used?
Used, if depreciation matters to you — a new car loses 20–30% in year one. The budget cares about total cost, not newness.
When is the best time to buy?
When the dated budget says the purchase month stays positive. Timing the market matters far less than timing your cash.
Buy the car the budget allows
Free dated purchase planning.