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.

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