Car Buying Tips: Nowadays, whether it’s a house or a car, most people opt for loans to make these purchases since their prices can reach into the lakhs, making it tough for anyone to pay such a large sum upfront. However, once the loan is taken, managing the monthly EMI can become a challenge. This often happens because individuals borrow a significant amount, leading to hefty EMIs that can strain their finances.

If you’re planning to buy a car in the upcoming financial year, consider using a smart approach. The 50:20:04 rule can be incredibly helpful in keeping your budget intact while ensuring your EMIs are manageable.

Breaking down the 50:

The “50” refers to 50% of your income. It’s easy to get tempted by flashy cars and take out a large loan without thinking it through. However, financial experts advise against purchasing a car that costs more than 50% of your annual income. For instance, if your annual salary is Rs 12 lakh, aim to buy a car that’s no more than Rs 6 lakh to avoid disrupting your budget.

Understanding the 20:

The “20” signifies the down payment you should make, which should be at least 20% of the car’s on-road price. Having this amount ready as a down payment will help lower your loan amount, making it easier to manage.

The 04 rule:

The “04” indicates that the loan term should not exceed 4 years. While some people extend their loan duration to reduce their monthly payments, this often results in higher interest costs, ultimately leading to more financial strain. Therefore, keep your loan period short—ideally, no longer than 4 years when purchasing a car or any vehicle.