Buying a Car • Mercer County, WV • 1 / 4

How Much Car Can You Pay For? • Mercer County, WV

Budget for payment, insurance, gas, repairs, and registration before you shop.

The 20/4/10 Rule

• 20% down payment (save $4,000 for a $20,000 car).
• 4-year loan maximum (48 months, not longer. Longer loans often mean more interest).
• 10% of your gross monthly income (total before taxes) on total car costs: car payment, insurance, gas, and maintenance combined. If you make $2,000 per month, try to keep your total car costs at $200 per month.

• Car payment: Loan periods are usually 48-60 months. Shorter is better.
• Insurance: This varies widely per year depending on age, type, and driving record. Car insurance can sometimes cost over $2,000 per year.
• Gas: Budget $100-$200 per month. This varies depending on your car’s fuel efficiency and how much you use it.
• Repairs and maintenance: You should set aside about $200/year for maintenance of a new car. This cost will vary widely for used cars, but you should set aside at least $500.
• Registration and taxes: Make sure you look up your local car registration costs and any associated fees and taxes.

• New cars lose 20-30% of their value in the first 2-3 years. Buying a 2-3 year old certified pre-owned car can help you avoid the big depreciation hit but still get a newer, reliable car.

• Use the 20/4/10 rule with your income. For example, if your gross monthly income is $2,000, your total car costs should not exceed $200 per month. Calculate how much that allows you to spend on a car. Sometimes it is ok for this to be more depending on how much you rely on consistent access to a car.