Purchasing a new BMW vehicle is a major investment, and it’s important to figure out exactly how much you can spend. Using the 20/4/10 rule with our BMW payment calculator can help you map out your finances.
What is the 20/4/10 Rule?
The 20/4/20 rule focuses on three financial areas crucial to the car-buying process:
Down Payment
The first thing to think about with your purchase is how much money you have to put up immediately. You should aim for 20 percent of the total price, as this will shrink your loan substantially. If you’re planning to replace your older car, check out its trade-in value to see what it’s worth.
Loan Term
Next, consider how long you want your loan term to be. These can be as short as a year or as long as eight years, but going with one in the middle is probably your best bet. With a four-year loan, you will get reasonable monthly payments and avoid extra interest payments that come with a longer loan.
Monthly Payment
Finally, you need to come up with an affordable monthly payment. To do this, calculate 10 percent of your monthly income. This is the number you don’t want to go over for all car-related expenses, which include fuel costs and maintenance along with your monthly car payments.
Contact BMW of Fort Washington to Learn More About Budgeting
Want help putting a budget together for your vehicle purchase? Get in touch with our finance team at BMW of Fort Washington. Or, if you’re ready to begin the process, you can fill out our online financing application to get pre-approved for your loan.