Financing a car can bring high monthly payments but covering a large portion of the car’s price via down payment is a great way to reduce the strain. While you can usually put a down payment of any amount, what’s the right amount for a down payment? Here at Gurley Motors, we have some information on the right down payment.
Benefits to making a down payment include lowering the monthly payment, loan interest rate, and shortening the length of the loan. When a buyer puts down more money in the form of a down payment, lenders are more confident about financing that buyer’s purchase.
For new cars, the right down payment is usually predetermined. If it isn’t, 20% of the car’s price is a good place to start. The same rule applies for used cars. Lenders often require a larger down payment on a new car to offset the car’s initial depreciation. After all, the lender holds your car’s title until the loan is paid in full.
If you don’t have 20% of a new car’s price for a down payment, a trade-in vehicle can help meet the required amount. The owner and dealership agree on the trade-in vehicle’s value so it’s in your best interest to negotiate!