VIP Wealth Advisors

This popular car-buying rule isn't realistic for most Americans—here's the income needed to make it work

For years, financial planners have recommended a simple rule of thumb to help drivers avoid taking on too much car debt. The so-called 20-4-10 rule suggests buyers put 20% down, finance a vehicle for no more than four years and keep total transportation costs below 10% of their gross income. The guideline is meant to keep transportation costs manageable, limit interest expenses and reduce the risk of owing more on a vehicle than it's worth since cars typically depreciate over time.