Buying a new car is an exciting time, yet it can also be expensive. If you’re thinking of getting a new vehicle anytime soon, you’ll want to consider the pros and cons of a down payment.
While some lenders will require you to have a down payment to show your commitment to paying back the loan, you’ll find there are ways to get around needing extra cash up front.
Benefits of Buying a Car with a Down Payment
Having a down payment when purchasing a vehicle can definitely be helpful, here’s why:
Paying Less Interest
When you have a down payment for a car, you won’t need to borrow as much money. That also means the total interest you will be paying will cost less in the long run.
When you do the math, you’ll find that you can be saving hundreds of dollars simply by putting money down to buy a car.
Another great reason to have the money upfront is that it can be a big help in getting a lower interest rate.
Get Approved More Easily for Your Loan
Cars start losing their value as soon as you drive them off the lot. That means a lender will have a lot to lose if you don’t repay the loan.
With a down payment, lenders will feel more confident in lending to you so you will have an easier time qualifying.
Lower Monthly Payments
Paying off your car loan can feel overwhelming, but what if your monthly payments were lower? When you make a down payment, you can reduce the cost of your monthly payments.
By putting more money upfront, you’ll find that you will feel less stressed each month as you make your payment.
Not Owing More Than Your Car Is Worth
Battling depreciation can be difficult when you’re buying a new car. Depreciation is the loss of value over time.
If you’re looking to invest in a new car, you should think about putting down at least 20 percent of the selling price. Unfortunately, you cannot stop depreciation, but a large down payment can help to give you a cushion between the value of the car and the amount you owe on the loan.
Reasons For Not Making an Auto Loan Down Payment
While there are many benefits of making a down payment, there are also reasons why people choose to forgo this process when choosing a new vehicle.
Having Enough Cash
The number one reason why people don’t make a down payment for a new car is they already have enough cash to pay for the vehicle outright.
If you have enough cash to pay for your car, you’ll find that you’ll be in the clear. You won’t have to worry about monthly payments, auto loans, or even auto repossession.
Yet, cars can be expensive, and you’ll want to make sure you’re getting the most bang for your buck. If you only have a few thousand dollars to buy a car, it could be smarter to use that as a down payment on a car you really want or one that is in better condition instead of settling for one that may break down sooner rather than later.
Needing Too Much Money as a Down Payment
When looking into getting a new car with an auto loan, many borrowers are required to make a down payment of at least $1,000 or 10 percent of the vehicle’s selling price. You’ll want to speak with your lender beforehand so you can see exactly how much you’ll want to bring when purchasing a new vehicle.
If you’re looking to trade in your old car, it can help offset the costs of a down payment. When you have a trade-in with equity, you can use that car’s value to pay for the down payment and even help to lower the amount you’ll need to finance the new vehicle.
Running Out of Time
Another way to get around putting money down on a car is by applying for a loan with a co-borrower. A joint auto loan will take both of your combined incomes into consideration, which gives you a better chance of getting a loan that you might not qualify for on your own.
Are You Ready to Get the Car of Your Dreams?
Down payments can make a huge difference when you’re looking to get an auto loan for a new vehicle. Extra Credit Union can work with you to help get you an auto loan, no matter your credit score.
Are you ready to look into your options for an auto loan?
- Apply online: There is no obligation.
- Apply in person: Sit down and chat with one of our friendly and knowledgeable lenders at our Main Office.
- Apply by phone: Call (586) 276-3000. We are available 24 hours a day, 7 days a week.
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