What Kind of Down Payment Do I Need to Finance a Car?
A car is one of the biggest investments in your life and you need to tread cautiously before buying one. The average cost of a new car in the U.S. is around $33,000 and more. If you are planning to take a car loan, you need to first consider the amount of a down payment you will be required to pay to finance the car. There is no hard-fast formula or rule to calculate a down payment. However, auto experts say, you should be ready to pay 20% of the total cost of the vehicle as a down payment.
Can You Make a Small Down Payment?
Though it is mentioned that 20% of the total price of the car should be given as a down payment, you can still purchase a car by paying less. Many car dealerships are ready to sell cars on lower down payments as the costs of cars have increased but the income of people has remained flat for many years. Many car dealerships will consider a smaller down payment if you have a good credit score. You need to check with the car dealership for the lowest amount possible in your case.
What Is the Ideal Down Payment Amount?
According to financial experts, there is no magic figure that can be considered as an ideal down payment. It differs with each person as it depends on various factors, including an individual’s financial standing. The ideal down payment for you would be the amount you can save without emptying your savings and provides a good value for the car finance.
If possible, you need to consider paying a larger down payment amount as it will reduce the monthly payments. Another benefit of a larger down payment is that you would end up paying less for the car.
Can You Get Zero Down Payment on A Car?
Zero down payment means all money remains in your pocket and you drive the new car to your home. Many dealerships will consider zero down payment requests when purchasing a car provided that your credit score is in good shape. However, there are a few drawbacks to zero down payments. You will be required to pay higher monthly installments and higher interest charges. According to auto loan experts, you need to consider paying 10% to 15% of the total price of the car as a down payment even if you are eligible for the zero down payment.