How Much Should a Down Payment Cost Me?
Shoppers tend to focus so much on securing a feasible month-to-month financing plan that they forget all about the initial down payment. When determining the cost of this unaccounted expense, you need to consider a variety of things, both in the present and future. By understanding the effects of a large down payment in relation to your current financial state, calculating the right price point should not be a challenge.
Benefits of a Large Down Payment
Generally, the bigger the down payment, the less money you will pay overall. This is because large down payments often lead to shorter-term loans, meaning you pay less interest over the payback duration. As well, large down payments help creditors assess your file, so you may even reduce your monthly interest rates in the process. Many people request long-term payment plans, regardless of this initial lump sum, in exchange for smaller bills. Whether or not you opt for a long- or short-term payment plan, however, higher down payments typically help individuals with low credit scores obtain and manage auto loans.
Disadvantages of a Large Down Payment
Knowing the above, loan holders should never overspend on a down payment; this would remove any “safety blanket” in place. Auto loans require commitment, so you must foresee possible future obstacles (i.e. loss of job, collision, natural disaster, etc.). Your number one priority, especially for an individual with a low credit score, is to pay your bills on time. If a larger down payment takes away your ability to guarantee regularity, then opt for the bare minimum.
Determine Your Financial Situation
Pulling Your Credit Report
You will not only need to calculate the cost of your day-to-day lifestyle, but you must also consider all other long-term obligations by reading your credit report. This will help gauge the size of the down payment you should make. Look specifically at your credit history: Do you trust yourself to pay the monthlies after dropping a large down payment?
Asking the Lender for Advice
For used cars, the standard down payment is 10% of the final sale price. Lender depending, this may or may not differ. The choice is yours whether you wish to exceed this minimum or not, but always inquire about incentives, trade-ins, and other deals that may boost the value of your down payment without cutting into your savings. Come in and speak with one of Trillium Auto Group’s trusted professionals if you feel troubled by this decision. As both car specialists and credit experts, we can help you make the right choice. That way, you leave the car lot without worry, knowing all of your needs have been satisfied.