What is a down payment?
A down payment is an initial up-front partial payment made when purchasing a vehicle. It is usually a percentage of the total cost of the car.
How much should you pay as a down payment on a car?
Experts recommend paying at least 20% of the total cost of the car as a down payment. However, if you don't have the extra funds, paying in the 10-12% range might be a better choice.
Is it worth putting a big down payment on a car?
Yes, a larger down payment can help you build equity faster, protect you and the lender against depreciation and potential loss, and improve your chances of approval for a loan.
Does a bigger down payment improve my chances of approval?
If you have no credit or a lower FICO score, a larger down payment can improve your chances of being approved for an auto loan. Additionally, you may qualify for financing with better terms and a lower interest rate.
What are the disadvantages of a large down payment?
Providing more money down doesn't guarantee a lower interest rate, and it can cut into your savings. Depending on the vehicle you choose to buy, 50% can be a lot of money to put down on an auto loan.
Is zero down too good to be true?
Putting nothing down could result in a higher interest rate or potentially leave you upside down on your loan. Zero down isn't necessarily a bad choice, but you'll have to be extra diligent in staying on top of any additional costs that are added to the loan.