Why should I have a Down Payment when purchasing a Vehicle?
Why should I have a Down Payment when purchasing a vehicle? There are a few different reasons that I will outline in this post.
Equity in down payment.
When you have a down payment you are putting more equity into your new purchase. This will put you in a better position when it comes time to trade in on your next vehicle. When you buy a new or used car, it loses value every day you own it, even the day you drive it off the car lot. A down payment reduces the difference in the amount that you will owe on the car and the amount that your car is now worth.
When your car is worth less than what you owe to a lender, you are “upside down.” The more down payment you have, the less upside down you will be. With enough down payment, you may never be upside down in your loan. This gives you the freedom to sell or trade in your vehicle whenever you would like.
Better Loan Terms with more down payment.
With more money down, you are showing potential lenders that you are willing to put more at stake to purchase this vehicle. Lenders see this is a sign of security and that you are more likely to pay for your vehicle. This is especially important if you have had past credit problems. It may even be required by the lender that a larger than average portion of the total price be put down to qualify you for financing.
Lower Payment or Term
If you have more money for a down payment, you will reduce the amount you need to borrow to purchase your new vehicle. This can lower your monthly payment to a more affordable range and/or decrease the number of payments you will have to make to pay off your loan.
The next time you go into the dealership to purchase a new car, make sure you know the most you can put on a down payment. You should always try to have a Down Payment when purchasing a vehicle. It will increase the chances of being able to trade in your vehicle sooner, possibly get you better rates and terms, and lower your monthly payment. Then you will be on to a brighter future in your newly purchased vehicle! Apply today!