If you are thinking of buying a car, there may be a number of questions on your mind. One thing that you're probably wondering is, "How big should my down payment be?" While there are some universal guidelines, the perfect dollar amount won't necessarily be the same from one buyer to the next.
Examining Your Car Buying Position
Coming up with an ideal down payment requires some forward thinking. Your goal is to make the cash that you provide up front significant enough to save you money down the road. So, it will be necessary to keep three things in mind: Your credit, your interest rate and your new car's depreciation potential.
- Get to know your credit rating. Do you know where you stand with your credit? Is it good, bad or somewhere in between? You should know exactly what your credit looks like before attempting to purchase a vehicle, so request a copy of your credit report from AnnualCreditReport.com. While you're at it, get easy access to your credit score from a reputable source.
- Is your credit less than perfect? If you have moderately to severely damaged credit, you may be facing less than ideal terms on your auto loan. Having a substantial down payment may help you earn a better interest rate, and it will also prove to your lender that you are serious about your car purchase. Remember that your current vehicle can stand in as part or all of your down payment if you're planning to trade it in when you buy the new (or new to you) car.
- Do you have good credit? A down payment is always beneficial, even for buyers with the best credit. However, if your credit rating is excellent, you may be eligible for incentives (cash back, 0% APR, etc.) that will make having a down payment less necessary than it would be for buyers with flawed credit.
- Are you buying a brand new car? Whether you have good credit or bad credit, the purchase of a new car makes a down payment more important. This is because new vehicles lose value quickly – Up to 20% during the first year of ownership. Providing cash up front will protect you from accruing negative equity, or becoming "upside-down" in your loan.
If possible, putting down 20% of the vehicle's total cost is ideal. However, many dealers are okay with 10% or even just $500 if this is as much as you can afford.
The Best Financing for Every Situation
Figuring out your down payment is important, but getting the right auto loan is even more crucial. Want to make your financing as easy and hassle free as possible? Just contact the experts at Auto Credit Express, and get the help you need in finding the best available loan. With our assistance, you can be approved with even the worst of credit.
Just fill out our fast and secure online application to get started today.