Car Affordability Rule

The 20/4/10 Car Rule

Test affordability before buying.

This rule evaluates a car purchase against three limits: at least 20% down payment, loan term of 4 years or less, and total monthly transport cost under 10% of gross monthly income.

Check Scenario Read explanation ↓

20%Down payment

4 yearsMax loan term

10%Transport-cost cap

Explanation

Rule mechanism and constraints.

Definition

The rule combines down-payment discipline, loan-duration control, and cash-flow ceiling to reduce overextension in car financing.

Down payment ratio = down payment / car price
Term check = loan years <= 4
Transport ratio = (EMI + insurance + maintenance) / monthly income

Limitations

Does not include fuel, parking, or depreciation variability.
Interest rates and credit terms differ by borrower profile.
It is a screening framework, not a purchase recommendation.

Calculator

Check your 20/4/10 compliance.

Enter income, car cost, and financing assumptions to test each rule component.

Gross monthly income Car price Down payment Loan term (years) Loan interest rate (% p.a.) Insurance + maintenance (monthly)

Example Scenario

Sample car financing check.

Scenario inputs

Monthly income: INR 120,000
Car price: INR 1,200,000
Down payment: INR 240,000 (20%)
Loan: 4 years at 9% p.a.

Calculation walkthrough

Loan amount = 1,200,000 - 240,000 = INR 960,000
Monthly transport cap = 120,000 × 10% = INR 12,000
Compare EMI + fixed costs against INR 12,000 cap.

Chart

Rule thresholds vs your scenario.

Each bar compares your value with the rule limit for that dimension.

Disclaimer: This page provides educational affordability checks, not financing advice. Vehicle decisions should also account for fuel, maintenance variability, and overall household goals.