Herb Gordon Subaru Helps with Understanding the 20/4/10 Rule for Car Financing

Getting Subaru finance for a new car may seem daunting at first, but our knowledgeable team will put you at ease in no time. In fact, when you follow the 20/4/10 rule for car financing, you'll have great peace of mind right from the start.  

'20% Down' 

The first part of the rule - 20% - refers to the size of the down payment you make for a new car. Specifically, our team of Subaru dealers suggest making a down payment whose amount is at least 20% of the car's sticker price. Doing so will significantly reduce the amount of interest you'll pay over the duration of your loan.  

Plus, 20% down will lower the amount of your monthly car payment. Now, we realize that there are exceptions to every rule, and that not everyone can put down 20%. In such cases, we can easily explore alternative scenarios that put you behind the wheel of the car you love, for a reasonable down payment.  

'No More Than 4 Years' 

The second part of the rule - 4 - pertains to the length of the loan you agree to. In this case, four years is the maximum length you should consider for a car loan.  If you have a loan that's longer than four years, you'll wind up paying significantly more interest, and thus "overpaying" for the car - at least, from a financing perspective.  

When you visit Herb Gordon Subaru, we'll run different payment scenarios with varying loan lengths. You might find that you can afford to sign a three-year loan, in which case the interest would be even lower, and the car paid off that much faster.  

 '10% of Income' 

Last but not least is 10 percent - as in, 10% of your monthly income. This relates to the amount of money you should pay for your monthly car payment on a Subaru Forester or Subaru Ascent.  

For example, if you take home $3,600 a month, you should target a monthly car payment that's around $360. Also, keep in mind that while your monthly car payment includes interest and financing charges, it doesn't include things such as car insurance and gas.  

Finance a New Subaru Car Today  

Ready to finance your next car? Get preapproved online for Subaru financing and then visit our local Subaru dealership. We have a great selection of new and pre-owned cars near Baltimore ready for you to test drive.