How much should I spend on a car?

A common rule is the 20/4/10 guideline: put at least 20% down, finance for no more than four years, and keep total transportation costs – payment, insurance, gas, maintenance – under 10% of gross income. Some budgeters go further and suggest your car's price stay under about half your annual income, especially earlier in your wealth-building years. Cars are depreciating assets, so every dollar of payment is money that won't grow, which is why keeping the cost modest has outsized long-term effects. Watch the total cost of ownership, not just the monthly payment; a long loan can make an unaffordable car look affordable. If you can't pay it off in four years, it's likely more car than the budget supports. Buying used and holding it longer is the single biggest transportation-cost lever.