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Honda Financing Tips: Understanding the 20/4/10 Rule

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There are many perks to Honda financing, but you don’t want to overspend on your vehicle and have financial difficulties down the road. One rule we recommend following is the 20/4/10 Rule, which sets parameters on your purchase to help you budget better. Clark Knapp Honda covers what these three numbers mean to buyers.

20 Percent Down Payment

The “20” in the 20/4/10 Rule applies to your down payment. If possible, you should aim to make a down payment of at least 20 percent. New vehicles lose a large chunk of their value the minute you drive them off the lot. A sizable down payment can offset that value drop and help you avoid becoming upside down in your loan. It also helps keep your monthly payments low.

Four-Year Term

The “4” refers to your loan term. Your loan’s length, which is also referred to as a term, is fairly flexible. If approved, you can secure a term anywhere from 36 to 84 months. However, it’s best to aim for a four-year term, because extending your loan too long can add thousands of dollars in interest to your loan, while making it too short results in steep monthly payments.

10 Percent Monthly Payments

The “10” is a parameter for your monthly payment. If possible, you should aim to keep your monthly payment under 10 percent of your take-home pay. Utilize an auto payment calculator, which can help you determine how much you have to spend overall.

Apply for Honda Financing in Pharr, TX

While the 20/4/10 Rule is an important guideline, it isn’t a must. If you are concerned about meeting these parameters, come see us at Clark Knapp Honda. We can help you find a loan that works for you today!

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