You've decided to buy a car, but you don't want to jump into anything too quickly. Past mistakes have taught you that, when it comes to making big purchases, research and planning are absolutely essential. So, while you're carefully weighing certain options (New or used? What make? What model?), one thing is definite: You want to have a good down payment saved up. So what qualifies as a good down payment?
Factors to Consider
There are a few things to evaluate in order to get a realistic estimate of how much cash you may want to put down on your vehicle. "As much as possible" would equal an ideal amount, but if you're like most people, you have a limited budget to work with. You're going to want enough of a down payment to significantly benefit you in the long run, but one that is still manageable in the short term.
How is your credit?
Request a copy of your credit report from each of the three major bureaus (Experian, TransUnion and Equifax) in order to see what potential lenders will be looking at when they check it. If your credit is in good shape, a minimal down payment will be okay. However, if your credit is significantly blemished (because of delinquent payments, charge-offs, bankruptcy, etc.), you'll be facing a higher than average interest rate, so you may want to put up a more substantial amount in order to pay as little interest as possible over the life of the loan.
Are you leaning towards a new or used option?
Typically, dealers will want at least 10% of the car's total price as a down payment on a used car, and 20% on a new car. (This 20% helps to counteract the vehicle's immediate depreciation so the buyer doesn't incur negative equity as quickly.) So, if you're looking at a new car that costs $20,000, you should plan on having at least $4,000 saved up for the down payment. Whereas, with a $10,000 used car, you'll want to have at least $1,000 available.
Do you have a car to trade in?
The value of your trade-in will be considered part of your down payment, so any value that it has will help considerably. For example, even if your current vehicle is only worth $500, this could (using the example provided) cut your minimum used car cash down payment in half and shave a healthy percentage from what you may be putting down on a new vehicle.
Get your Financing First
If you've been saving and planning, and you're finally ready to buy, let us help you get the most reasonable auto loan possible. Even if your credit is less than perfect, Auto Credit Express will make sure that you get fair and affordable financing. All you have to do is fill out our fast and secure application to get started today.