country even today Buying a car is not easy for millions of middle class families in India. If the dream of buying a car is fulfilled, then it is considered a great achievement. In such a situation, if you also belong to a middle class family and are planning to buy a car, then it is important to take care of some things, such as the cost of the car should not be too high. After buying a car, don’t let the burden of EMI spoil your budget. Today we are telling you a formula of 50:20:4. If you follow this, then after buying a car, neither your savings break will fail, nor will there be tension in paying the EMI later. So let’s know what is this formula?
Meaning of 50 in the formula 50:20:04
In the formula of 50:20:04, 50 means 50% of your annual income. Understand this in such a way that if your annual income is Rs 10 lakh, then you should not buy a car worth more than Rs 5 lakh. Financial experts say that if you buy a car that costs more than 50 per cent of your annual income, your budget will be out of whack. You may face financial trouble due to increasing EMI burden.
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Meaning of 20 in the formula 50:20:04
In this formula, 20 refers to the down payment of the on-road price of the car. Financial planners say that whenever you go to buy a car, you should have enough money to make a down payment of 20 per cent of its cost. Making 20 per cent down payment will reduce the EMI burden on you and will give you relief later. By the way, nowadays many banks are providing 100% finance facility. But this is not correct. Banks are doing this to increase their business. You have to bear the consequences of this later. So always try to make 20% downpayment.
Meaning of 04 in the formula 50:20:04
In this formula, 04 stands for the loan tenure of the car. That is, whatever car you buy, do not make its EMI more than 4 years. By the way, banks easily give EMI of 7 years on car loans. However, it is a deal of loss as you have to pay a huge amount in the form of interest. Keeping the loan tenure of 4 years, the interest has to be paid less and soon the burden of the loan also ends.
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