Down payments are especially important when you're looking to finance with a bad credit auto loan. Most automotive
lenders will require that applicants have a down payment in the form of cash or trade.
They do this to increase the probability that the borrower will make regular and timely loan payments.
If you've put your own money into a new car, you have a greater sense of ownership and equity in that vehicle, which
lenders may see as a sign that you're likely to make your monthly payments.
Besides re-assuring the Lender of your intent to make regular loan payments, a down payment also helps you by reducing
the total amount of interest you'll pay.
-A down payment can lower the monthly payment by reducing the total loan amount. (The larger the down payment, the lower
the monthly payment.)
-A down payment can be used to shorten the loan term.
For example, instead of lowering the monthly payment, you can use your down payment to reduce the amount of time the
vehicle is financed. From 60 months to 48 months.
In both cases the down payment reduces the total amount of interest you'll pay. This becomes more important when dealing
with the higher interest rates that commonly come with poor credit loans.
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