There’s an outdated check for whether or not you’ll be able to really afford a automobile. Put 20% down, finance for not more than 4 years and hold the whole lot the automobile prices you — fee, insurance coverage, gasoline, upkeep — beneath 10% of your gross earnings. That’s the 20-4-10 rule, and monetary planners have abided by it for many years (1).
The issue is passing that check isn’t really easy anymore. In line with a brand new CNBC evaluation, you’d have to earn about $120,000 a 12 months to afford a median used automobile beneath this rule (2). For context, the median U.S. family earned $83,730 in 2024, in line with the U.S. Census Bureau (3). In different phrases, an affordability rule that was meant for abnormal automobile consumers now assumes an earnings most individuals don’t earn.
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Nonetheless, monetary planners aren’t abandoning it. If something, they are saying it issues extra now than ever, as a result of the chance it guards in opposition to has solely grown.
“Vehicles have quietly turn into one of many largest wealth killers within the middle-class price range,” Mark Stancato, an authorized monetary planner at VIP Wealth Advisors, informed CNBC.
Why a median used automobile now calls for a six-figure earnings
It comes all the way down to how a lot you spend on the automobile. In line with Cox Automotive, the typical used automobile listed for $26,342 in April (4), up 3% from a 12 months earlier.
Now run that used automobile by means of the 20-4-10 rule, the way in which CNBC did (2). In line with the outlet, a 20% down fee involves $5,268, leaving $21,074 to finance over 4 years at a 6.98% rate of interest. That will get you to about $505 a month.
Then add the remainder of what the automobile prices to personal: about $190 (5) a month for insurance coverage, $201 for gasoline (6), and one other $100 or so (7) for upkeep and repairs. That places the entire at roughly $996 a month, or near $12,000 a 12 months, on a used automobile.
Beneath the 20-4-10 rule, which means a purchaser would wish gross family earnings of about $120,000. And bear in mind, that is the one that did the whole lot by the e book — purchased used, put cash down and stored the mortgage quick.
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The four-year rule nearly no one follows
When you run the numbers, it is sensible why so many consumers have moved away from the normal shopping for rule for brand new and used vehicles.
An Edmunds report discovered that 48-month phrases made up simply 5.6% of financed new-vehicle purchases in 2025 (8). In the meantime, loans of 84 months or longer (seven years and up) hit a document 22.9% of financed new-car purchases within the first quarter of 2026 (9). Persons are stretching the mortgage as a result of the month-to-month fee seems simpler to deal with, even when the complete price finally ends up being so much greater as a result of curiosity.
“Individuals don’t purchase vehicles based mostly on complete price anymore. They purchase based mostly on month-to-month fee, which is precisely how they find yourself in 72- or 84-month loans on a extremely depreciating asset,” Stancato informed CNBC (2).
What stretched loans price you later
An extended-term mortgage makes a automobile look extra inexpensive. The month-to-month fee shrinks, however the automobile is dropping worth the entire time, and also you’re paying curiosity for longer.
The invoice comes due at trade-in (if you swap your outdated automobile for a more moderen one). Within the first quarter of 2026, 31% of trade-ins towards new-vehicle purchases carried unfavourable fairness (which suggests the proprietor nonetheless owed greater than the automobile was value) the very best share for any quarter since early 2021, in line with Edmunds (10).
These debtors owed a median of $7,183. As soon as that debt will get rolled into the subsequent automobile, the fee climbs once more. Consumers who carried it ahead ended up with a median fee of $932 a month, $159 greater than the standard new-car purchaser (10). That’s how one stretched mortgage turns right into a costlier drawback.
What this implies in your cash
The easy takeaway is don’t decide a automobile by the month-to-month fee alone. That quantity is constructed to really feel manageable, but it surely doesn’t inform you what the automobile is absolutely costing you.
“Cease fixating on the month-to-month fee and suppose in proportion of gross earnings — that’s the half that has at all times been proper,” Jeff Decide, an authorized monetary planner at Chesapeake Monetary Planners, informed CNBC..
If the same old 10% of gross earnings rule doesn’t match, he says a extra sensible goal is to maintain complete transportation prices within the 12% to fifteen% vary of gross earnings. So for a family incomes $70,000 a 12 months, that may work out to roughly $700 to $875 a month for the whole lot the automobile prices, not simply the mortgage.
And to get beneath these numbers within the first place, Stancato suggests taking a look at a dependable used automobile that’s three to 5 years outdated — nonetheless trendy, nonetheless protected however sufficiently old that the primary proprietor has already taken the largest depreciation hit.
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Article Sources
We rely solely on vetted sources and credible third-party reporting. For particulars, see our ethics and pointers.
Google (1); CNBC (2); United States Census Bureau (3); Cox Automotive (4); Experian (5); Bureau of Labor Statistics (6); AAA (7); Edmunds (8), (9), (10)
This text initially appeared on Moneywise.com beneath the title: Common used automobile requires $120K in earnings to afford, in line with the 20-4-10 rule — advisors name it a ‘wealth killer’
This text offers info solely and shouldn’t be construed as recommendation. It’s supplied with out guarantee of any variety.
