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

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

“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. “
Eric Schad
Answered on Apr 13, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

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.

Read advice from car experts at Jerry

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free