What is the 1/10th rule for car buying?

Can you explain this rule to me, and how it can be beneficial?

Answer provided by
Eric Schad
Answered on Apr 13, 2021
“To prevent stretching yourself too thin financially, the 1/10th rule for buying cars dictates that you should only spend 1/10th of your gross annual income on a vehicle, whether new or used. For example, if you make $60,000 annually, you should only spend $6,000 on a vehicle.
In a spending culture such as the one in the U.S., this may seem substantially lower than what you’d expect. But the upside is that you won’t feel any pinch financially if you lose your job or income. “

Did this answer help you?

Ask us a question by email and we will respond within a few days.

Have a different question?

You can meet us at our office and discuss the details of your question.

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies