Brian Preston's 20/3/8 car rule calculator
See how much car the Money Guy 20/3/8 rule allows on your income and cash, which of its two ceilings binds, and what a six-year loan still owes at year three.
Brian Preston Reviewed Aug 7, 2026 Rule located in Money Guy, 2026 Put your numbers through the rule
The source establishes the rule. The values below belong to you, and the output is JMM's deterministic calculation.
Every field recalculates immediately. Changed values can be copied into a shareable URL.
- Payment over three years
- $600
- Cash down at 20%
- $4,822
- Interest over three years
- $2,311
- Investing minus car payment
- $300Above zero, which is what the same source asks for
The payment ceiling sets the limit here. Your cash would have covered 20% of $40,000, so the constraint is the 8% of gross income, not the down payment.
Three-year loan, the rule
- Monthly payment
- $600
- Total interest
- $2,311
72-month loan, same car
- Monthly payment
- $334
- Total interest
- $4,724
- Still owed at month 36
- $10,721
What each ceiling allows
- Payment ceiling allows
- $24,111
- Your cash allows
- $40,000
What the source says, and what the calculator adds
Source-supported ruleThe Money Guy guide states three conditions on any financed car at once: 20% down, a term of three years or less, and a monthly payment of 8% or less of gross income counting every vehicle loan you carry. It adds a fourth test alongside them, that monthly investing should exceed the monthly car payment. 
JMM calculationJMM applies both ceilings together rather than one at a time. It solves the largest three-year loan the 8% payment allows, converts that to a price at the 20% down payment, checks it against the price your cash can actually cover, names which ceiling binds, and amortizes the same loan over a term you choose so the three-year condition can be seen rather than asserted. 
What changes the answer
Two ceilings, and only one of them is usually the problem
A high earner with no savings is stopped by the 20%; a saver with modest income is stopped by the 8%. The result names which one is binding, because the fix is completely different in each case.
The term does more work than the rate
Move the comparison loan out to six years and watch the payment fall while the interest rises and the balance at month 36 stays large. That gap is what the three in 20/3/8 exists to prevent.
Who else has run the numbers on this rule
Everyone below has published a position on this specific rule with a figure attached. Each row names the document, the date and the passage, so you can check the number rather than take ours.
Melinda Zabritski, ExperianHead of automotive financial insights at Experian, reporting the firm’s quarterly census of US auto loan originationsNarrows the rule69.48-month average new-vehicle loan term, a record $770 average payment, and 35.55% of new loans past six years, Q1 2026
Experian’s Q1 2026 market report measures how far the actual market sits from the rule. The average new-vehicle loan runs 69.48 months, nearly twice the three years 20/3/8 allows, the average new-vehicle payment reached a record $770, and 35.55% of new-vehicle loans now carry terms longer than six years, up from 30.83% a year earlier. This is not an argument against the rule; it is the measurement of how unusual following it would make you.
The average loan term for a new vehicle was 69.48 months this quarter
ExperianMay 28, 2026New Experian Automotive report shows nearly one-third of automotive loan terms are longer than six yearsPress release accompanying Experian’s State of the Automotive Finance Market: Q1 2026, quoting Melinda Zabritski. Average new-vehicle term 69.48 months; average new-vehicle monthly payment rising from $748 to $770 year over year; share of new-vehicle loans with terms longer than six years at 35.55%, against 30.83% a year earlier.
Amy Fontinelle, writing for Capital One Auto NavigatorPersonal finance writer, published on the car-buying site of Capital One, one of the largest US auto lenders. The commercial position is worth naming: the argument against a strict rule is being made by a company that sells the longer loan.Against the rule$166,500 of income needed for an average new car under the rule, against a median household income just over $67,500
The article argues the rule is obsolete on affordability grounds. Working from an average new-vehicle price of about $47,000 in April 2022, it calculates that a 20% down payment on a 36-month loan at 4% produces a $1,110 monthly payment, which needs $166,500 of annual income to stay inside 8%. Against a median household income just over $67,500, it concludes the rule is out of reach for most buyers. JMM reads the same arithmetic as an argument about the price of the car rather than about the rule: a test you fail because the item costs three times what you earn is working correctly.
according to the Census Bureau in 2020, the U.S. median household income was just over $67,500, meaning that for a large percentage of the population this rule is impossible to apply, especially when shopping for new cars
Capital One Auto NavigatorJun 8, 2022Why the 20/3/8 Car Buying Rule May Be ObsoleteBylined Amy Fontinelle, June 8, 2022. New-car worked example using an April 2022 average transaction price of about $47,000, a 20% down payment and a 36-month loan at 4%, producing a $1,110 payment and a $166,500 income requirement, compared against the 2020 Census Bureau median household income.
The 3 is the rule. The 20 and the 8 are how you survive it.
Of the three numbers, the three-year term is the one doing the work, and it is the one almost nobody keeps. Experian puts the average new-vehicle loan at 69.48 months, with more than a third of new loans running past six years, which means the typical buyer spends most of the loan owing more than the car is worth. A three-year term forces the price down to something the balance sheet can actually carry, and the 20% down payment is what stops you starting underwater on day one. The 8% is the weakest of the three because gross income is a loose denominator, but it is a reasonable guard rail. Where JMM parts company with the rule is what to do when you fail it: the honest answer is a cheaper car, not a longer loan. If 20/3/8 says no to the car you want, it has told you the price is wrong, and every workaround on offer is a way of paying more to hear a different answer.
Not the calculator’s limits. The rule’s.
It prices the loan and says nothing about the car
A high-mileage twelve-year-old car clears 20/3/8 easily and can still be the more expensive decision once repairs, downtime and a resale value near zero are counted. The rule measures financing risk. It has no view on cost per mile.
Gross income is a loose denominator
Eight percent of gross is a very different bite for two people with the same salary but different tax states, family health premiums and retirement deferrals. The rule reads a number that never reaches either of their accounts.
Every vehicle is treated as consumption
For a tradesperson or a delivery driver the vehicle produces the income that pays for it, which is an investment case the rule cannot express. It would cap a plumber’s van at the same 8% as a commuter’s sedan.
What this model does not know
- Sales tax, registration, title and dealer fees are excluded. In most states they are paid at signing and reduce the cash available for the 20% down payment.
- Insurance, fuel, maintenance and repairs are outside the model. The rule scores the loan, not the cost of owning the car.
- A trade-in is only equivalent to cash if its value clears whatever you still owe on it. Enter net equity, not the sticker figure.
- The APR is yours to enter and is not a quote. Advertised rates are usually the best tier of credit.
Before you use the result
Is the 8% monthly or annual income?
Monthly gross income, and the cited guide applies it to every vehicle loan you carry rather than to the new one alone. That is why this page has a field for payments you already have.
Does the rule cover leases and cash purchases?
The cited guide states the rule for cars you finance. A cash purchase has no term or payment to test, so only the affordability judgment is left; a lease has a payment but the 20% and the three-year payoff do not map onto it.
What if I fail on the down payment rather than the payment?
The result names which ceiling binds. If cash is the limit, the rule is not telling you to borrow more, it is telling you to wait or to buy a cheaper car; the 20% exists to stop you owing more than the car is worth in the first year.
The next question this page cannot answer
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Dave Ramsey, sourced rule 25% house rule calculator The same all-in ceiling logic applied to the larger purchase, from a different publisher and with a stricter term.
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Calculator Compound interest calculator What the payment becomes if it is invested instead. The rule’s fourth condition asks investing to exceed the car payment; this prices the difference.
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Ramit Sethi, sourced rule Conscious spending plan calculator Where a car payment lives in a household budget, scored against a published fixed-cost band rather than an income percentage.
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