Buying a new car is a big financial undertaking and you need to factor in many costs when deciding your budget. Costs include the monthly payments for the car, maintenance costs, and the down payment you make.
The down payment on a car sometimes comes as a shock to people when buying or upgrading their car, so we’ve collected as much information as possible about them to help you understand how much you need to put down and what the benefits are of putting a down payment towards a car. Take a look now to find out more.
So, How Much Money Should I Put Down?
When buying a new car, it is recommended that you make a down payment, even if the dealership doesn’t require you to do so. Most guidance suggests putting a payment of at least 20% of the total value of the car down.
You can put a bigger down payment on the car if you want to get the best possible rates on your car loan, but you will need to factor this into the decision to buy a car.
Can I Put a Zero Down Payment Towards a Car?
Yes. Most dealerships and car loan lenders don’t require you to put a down payment on a car. If you don’t have the money for a down payment, but need a new car, you will still be able to get a car loan without a down payment.
It is important to note that some dealerships may only allow you to put down zero down payment if you have a particularly high credit score.
What About Small Down Payments?
Experts agree that if you can do so, putting even a small down payment on your car is a good idea. A down payment of 10% of the car’s total value will still help you out. If you have been fretting over a down payment, and don’t have the recommended 20%, it may be worth putting down what you do have, even if it is only a small amount.
What Are the Benefits of Putting a Down Payment Towards a Car?
There are many advantages to putting a down payment on your car. We have summarized them below to give you the full picture.
Better Chances of Approval for a Car Loan
Though not required by many lenders, a down payment does make you more attractive to them. This means that if you put a down payment on your car, even a small one, you are more likely to be approved for a car loan.
Better Interest Rates
We all want loans with lower interest rates, and putting a down payment on your car makes this more likely. Other factors do impact your interest rates, like your credit history and the condition of the car, but a down payment will benefit you too.
Lower Monthly Repayments
With lower interest rates come lower monthly payments. Having low repayments can make your car loan more manageable and gives you extra cash to spend on other things.
The depreciation of a car is factored into all auto loans. Cars tend to lose about 10–20% of their value within the first year of being driven, and this money is essentially gone. Putting a down payment on your car means you offset the depreciation of the car.
Avoidng an ‘Upside Down Loan’
An ‘upside down loan’ is when the amount you owe on a loan is actually more than the value of the car. If you make a small or no down payment, this could end up being the case as you end up owing more on the car than it is worth.
Call Car Loan Masters if You Need a Loan for Purchasing a Car!
Car Loan Masters is a car finance and loan company in Markham that offers car loans for new and used cars. We are committed to making the loan application process as smooth as possible and will have you approved as quickly as we can. Get in touch today to find out more about our car loans.