Car buying is something that obliterates the financial well-being of tens of thousands of families across the US. Here is a simple rule that is recommended people follow to determine how much you can afford to spend on a car. I did not make this rule up, this is a common rule people use

The Rule

Each number in 20/3/8 stands for a figure of a number for financing a vehicle.

• 20 Stands for put down at least 20% of a down payment on the vehicle you purchase
• 3 Stands for the loan should be no more than 3 years
• 8 Stands for the payment should be no more than 8% of your take home income

Example: Your take home income is $40,000 a year

Multiply 40,000 by .08 to get $3,200 a year for a payment of $267 a month

The True Rule

By following a rule like this you are tragically doing faaarrrr better than most people in the United States. However if you can afford to do so, buy a used car in full. You will save a ton of money, and if you are like me and don’t care at all about vehicles you can get the car far cheaper than you would if you streched the boundaries of this rule.