Lexus Financial Tips: Understanding the 20/4/10 Rule

Part of applying for Lexus financial offers is knowing what kind of financing terms you should look for. That’s where the 20/4/10 rule comes in. This rule has helped Woodfield Lexus drivers find the best terms possible. As part of our Lexus Financial Tips series, here’s everything you need to know about this guideline for financing.

20 Percent Down Payment

The first part of the 20/4/10 rule refers to a 20% down payment, which is the minimum amount you should put down when you purchase a car. This is a good benchmark as it lets you reduce your monthly payment while not paying too much upfront. If you can afford to do so, paying more than 20 percent is recommended, as this will lower your monthly payments and accrued interest even more.

Four-Year Loan Terms

When you’re applying for vehicle financing, you shouldn’t apply for loan terms any longer than four years. Most loans will last between three and four years, which offers you balanced monthly payments. Longer loan terms require larger interest payments over time, while shorter loan terms increase your monthly payments substantially (and are harder to secure).

10 Percent of Your Monthly Income

Finally, you should dedicate no more than 10 percent of your total monthly income to vehicle expenses. This includes your total financing costs (including applicable fees and taxes) as well as maintenance costs, parking, and refueling costs. By keeping your monthly vehicle costs below 10 percent, you can ensure that you won’t waste money that should go to other expenses like rent or food.

Explore Lexus Financial Options in Schaumburg, IL

If you need any more Lexus financial advice or want to explore your options, our dealership can assist you. Contact Woodfield Lexus today to book some time with our financing experts.