Rules of Thumb for Car Buying
The 20/4/10 Rule
Put down at least 20%, finance the vehicle for no longer than 4 years, and keep total monthly transportation costs under 10% of your gross income.
The 3-Year Depreciation Hit
A new car loses roughly 40% to 50% of its value in the first three years. Buying a 3-year-old off-lease vehicle is often the mathematical sweet spot for value.
10% Maintenance Fund
Set aside at least 10% of the vehicle's purchase price annually into a sinking fund to comfortably cover tires, oil changes, insurance, and sudden repairs.