If you've been looking around at different auto financing promotions, you've likely seen plenty of offers, ranging from ones that require no down payment to ones that only need a $500 down payment. So, what is the best option for you? What can you even qualify for?
Let's start by talking about what the typical down payment suggestions are for a new car. Some say 20%, while others say the average is closer to 12%. This means that for a vehicle in the $10,000 to $15,000 range, you will need to pony up anywhere from $1,200 to $3,000 for a down payment on a car. When you're on a tight budget, coming up with this amount may prove problematic.
What About Zero Down Auto Financing?
If you have great credit, getting approved for a no money down auto loan is a breeze. But when you have bad credit, your chances without any collateral are significantly more difficult if not impossible. In all honesty, though, going into a loan without a down payment is a bad idea regardless of where your credit stands.
First of all, a down payment shows a lender that you are serious about your purchase. It gives them reassurance that you won't default on your commitment. For car buyers with bad credit, this can make all the difference between approval and denial. In some cases, a larger down payment may even improve the interest rate your lender offers you.
Also, when you buy a car, especially a new one, a down payment helps reduce the amount of depreciation you will need to deal with. When you drive a new car off the lot, you immediately lose over 10% of the value, as well as another 10% or more by the end of the first year. That's why the most popular suggested amount of money down is 20%. If you choose to sell the car after the first year, the amount you still owe on the loan could either be greatly reduced or you could break even.
Owing more than what your car is worth is known as being "upside down" on your loan. These percentages are based on a five year loan term, so how much you are upside down on your loan can also be affected by your loan term and whether or not you put any extra money each month towards your car payment.
Do I Have Down Payments Options Besides Cash?
If you're having trouble coming up with the cash for a down payment on a new car, you may have another great option if your current vehicle is in decent shape and paid off. In some cases, the value of your current vehicle could be worth thousands, greatly reducing the amount of cash you would need to bring to the table. Of course, trade in values vary on the age and condition of the car, so your "mileage" may vary.
If you're in search of a new vehicle, the team here at Auto Credit Express can help find you the dealer that understands your situation. We work with people just like you everyday, so we know that not everyone can come up with thousands of dollars for a car, especially when you need that vehicle now. Get started today by filling out the quick online application.