4 Things To Know About Down Payments
You’ve been wanting to buy a new car for a while now. You’ve been patiently saving and you think you’ve finally enough to put as a down payment on the car you want. A down payment is always a good idea, but you still have a couple questions about it.
How much should a down payment cost you? Will good or bad credit affect your down payment? What if you don’t want to put the full amount you’ve saved down?
Whether you have good or bad credit car dealers are likely to want to see a down payment of some kind.
A down payment can prove to be a useful asset in purchasing your next vehicle.
Will you be buying a new or used car?
Knowing this information will affect how much money you will want to use for a down payment. New cars will need to have more of a down payment as there is depreciation that needs to be covered.
A new vehicle depreciates about 20% after its first year of use so most lenders will want to make sure they are covered for at least that first year and offering a 20% down payment is a good way of doing that.
Used vehicles won’t necessarily require a minimum of 20% because there is no depreciated value that has to be covered.
Do you have good credit?
While this may be the question that makes you squirm in your seat, being honest and fair with yourself about your credit will help you get the best offers for your financial situation. Should you have excellent or even good credit history, you won’t necessarily have to offer a down payment, if you choose.
However, if your credit history is questionable or could use improvement, take this opportunity to offer what you can for a down payment, but make sure to be reasonable with yourself.
How much can you put down?
Once you’ve assessed your financial situation and you have an estimate of how much money you can contribute to a down payment, consider your monthly payments.
The more money you can put into your down payment, the lower your monthly payments are, but be careful. Should you choose to put less down immediately, you will end up paying more throughout your payments.
Make Your Goals Achievable
Make sure to give yourself achievable monthly payments. Sure parting with a large sum of money you’ve been saving for is difficult but in the long run, it will lower your out-of-pocket monthly payment which saves you money over time.
Making your scheduled payments on time will improve your credit score so you will have less to worry about for future investments.