So, you really need a car, but you don't have a lot of cash on hand. However, you have a reliable income from a stable job, so you’re sure that you can keep up with a monthly payment. And you've seen television ads from plenty of car dealers offering "0 Down" promotions. This kind of deal would solve your problem perfectly, right? Well, it all depends on what your credit looks like.
Good Credit? No Problem
Most of those amazing No Money Down offers from dealerships are geared towards buyers with "good credit," or people with a FICO score of 700+. You may not even be able to get a loan without a down payment if your credit score is too low. And even if you can, this temporary convenience may not be worth the various problems that could come up down the road.
Bad Credit? Be Cautious
Approval issues aside, there are other reasons why a down payment can really help a car buyer who has less than perfect credit. Generally speaking, good credit will earn you a good interest rate on your car loan, and those rates will be higher for customers with bad to very bad credit. And the particular rate that you will have to pay has a lot to do with the potential benefit of a down payment.
- The Depreciation Factor: Never forget that vehicles lose value rapidly. When you purchase a car, it is worth X amount, and you will be financed for that amount. But almost immediately, that car is worth less than you paid for it, and will continue to depreciate while you are obligated to make payments based on the selling price of the vehicle. It won't take long for you to owe far more on the car than it is actually worth, but putting money down when you purchase the vehicle will at least slow this process.
- The Interest Rate: If bad credit forces you to accept a high interest rate, you will end up paying more money for the car in the long run anyway. So, not putting any money down initially will have an even greater impact on how quickly you accumulate negative equity.
- Worst Case: If an accident causes your car to be damaged beyond repair, and you're a year into paying off a high interest loan that has a life of 5 years, your insurance will only pay what the car is worth, and you will be responsible for the remainder of the loan (unless you have gap insurance). And this could mean that you will end up owing thousands of dollars on a vehicle that you can no longer drive.
If you're working on repairing damaged credit, taking the time to save some money for a down payment before making your next car purchase could eventually save you money and frustration. And don't forget about the value that you may have in a trade-in vehicle because this also counts as money down. Even if you qualify for a "0 down" offer and you're buying a new car, you may want to consider purchasing gap insurance in order to guard your investment against the unexpected.
Whatever your particular situation looks like, and no matter how bad you may think your credit is Auto Credit Express can help you to be approved for an auto loan.
We will walk you through every step of the process and make sure that you get the best payment arrangement possible. Just fill out our fast and secure online application to get started today.