I’m almost 35 years old and have purchased a couple cars in my lifetime. It comes with getting married as young as we did. But I was lucky enough to have purchased my first car with my husband. Whether or not we have a down payment was always part of the discussion before purchasing a car.
Do you HAVE to put down a down payment?
No, you don’t.
But there are definitely benefits to putting a down payment on a car loan.
- The higher the down payment, the lower the monthly payment: Did you know that your payment could drop about $20 per month per $1,000 you put down? This is based on a 5% interest loan.
- Have great credit and scored 0% interest? The more you put down, the less you make in payments. Everything you pay goes straight to the principal since there is no interest. But, if you don’t put anything down, it isn’t a deal breaker.
- A larger down payment helps you build equity in your car, protecting you against depreciation and loss. Imagine leaving the lot and your loan is still less than the car is worth.
- Making a down payment helps you get better financing offers. Even if it is just $100, making the effort to pay something up front shows the banks you are serious about making the payments, getting you more offers.
- Don’t have a down payment but have a trade in? Perfect. The money you receive for the trade in can go towards your new loan as long as you don’t owe anything on the previous car.
Our last car purchase was almost 2 years ago. We had a small $1,000 down payment but also had a car to trade in. The $5,000 we received for that car allowed us to buy the new car we were looking at instead of leasing like we had planned. The dealership was extremely helpful in showing us our options so we could make an informed decision.