Average used car requires $120K in income to afford, according to the 20-4-10 rule, advisors call it a 'wealth killer'

Article excerpt

Under the 20-4-10 rule, a financial guideline stipulating a 20% down payment, a four-year loan, and monthly car payments capped at 10% of gross income, the average used car now requires $120,000 in annual income to afford responsibly. Financial advisors are calling the soaring used-car prices a "wealth killer," as vehicles that once fit comfortably into most household budgets now demand six-figure incomes. The math is stark: a $30,000 used car with standard loan terms consumes more of a typical family's monthly cash flow than prudent financial planning allows. Rising used-car prices have created a widening gap between what Americans can actually afford and what the market demands, squeezing middle-income buyers out of car ownership altogether.