If you are in the market for a new or used vehicle, chances are you have tossed around what your best financing options are. Once you have selected the vehicle that is right for you and your family, you are going to want to have a plan in place on how you will pay for the vehicle. Below we discuss the benefits of putting money down on a vehicle and also offer some down payment tips.
Figuring Out Financing
When it comes to financing a vehicle, the credit decision is typically based off of four main criteria:
- Personal credit history
- Application information
- The type of vehicle you are purchasing (make, model, price, mileage etc.)
- Your down payment.
What is a Down Payment?
Before we dive into the down payment, we should discuss what a down payment is. When you finance your vehicle, a down payment is the amount of money or trade equity you pay up front. The amount of your down payment will directly affect your future monthly payment amounts. A down payment can also lower your annual percentage rate, saving you money in the long run.
How Much Should You Plan to Put Down?
Now that we have covered the logistics of a down payment, how much of a down payment should you put down? The more you are able to put down, the better off you will be. As we covered earlier, the more you put down, the less your monthly payments will be. A larger down payment can also provide you with more favorable financing terms and a lower rate. No matter how much money you have to put down, any amount is going to save you money down the road. Even a 500 down payment on a car is going to pay off in the future. Utilize the internet to discover what your exact monthly payments will be with your down payment. Many sites provide you with a car payment calculator, so you can determine what your monthly obligations will be ahead of time.
The down payment you put down does not necessarily have to be a cash down payment. If you have a vehicle you can trade in, dealerships will give you cash credit for the vehicle’s worth. This credit is your down payment. You can double dip by trading in a vehicle and also putting cash down at the same time, which will maximize your down payment. Even though it’s beneficial to put as much money down as you can, you should ALWAYS stay within your means. If putting a large payment down is going to make your other monthly bills challenging to pay, don’t do it.
Auto Action is Arizona’s leading used car dealerships Glendale when it comes to selection and price. We can help and guide you with any down payment questions you may have, as it’s our priority to keep you as a satisfied and happy customer.