Rule of 19
- 2 Comment
As my wife and I have started to research for our next car purchase, I was introduced to the Rule of 19 by the local car salesman…
I asked “Rule of 19?” I am only aware of the Rule of 72. The car salesman provided the a quick definition being a general rule of thumb of how much your monthly car payment would be for the total amount financed. The car salesman quickly calculated that for every $1,000 that I financed, I would pay $19 per month.
Aware of the car buying process and following the advice of many experts, I wanted to negotiate one thing at a time: #1. Total Car purchase price, #2. Financing (lease vs buy, interest rate), and #3. Trade-in value. Intrigued on what assumptions this rule of 19 depends on, I decided to re-create the math. Basically, the Rule of 19 is really the rule of $19.33 assuming a 60 month car loan term at a 6% interest rate. So if I wanted to finance $20,000 for my car loan, I would estimate a $386.60 monthly payment or 20 x 19.33
If you are interested in which number you should be using to assist in your car buying purchase, I have attached an excel sheet for options from 36 to 72 months with interest rates ranging from 0% to 8%.
This is the first of many analysis that I will complete in our search for the next family car. Please consider subscribing to stay current with the latest from Finance Puzzle.
2 Comments on this post
Trackbacks
-
Budgets are Sexy. said:
Interesting, i’ve never heard of that rule of 19 either…although i’ve always broken it down that for every $10,000 i spend, it’ll be about $200/mo in payments, and then use that when i look for a car higher or lower as an estimate. so it’s pretty close to the 19 rule, just with less math
And i think you’re totally on the right track with negotiating each piece at a time – car dealers love to mix it all up and get you off track.
September 7th, 2008 at 12:55 pm -
doctor S said:
Never heard of the ruleor 19 either, very valuable tid bit of information! But def makes sense, I hate car dealers and I hate cars since they lose value the second you drive em of the lot!!!
September 8th, 2008 at 2:42 pm
