What are the Benefits of Putting a Down Payment on a Car?
Are you currently in the process of looking for a new car? If so, have you considered making a down payment rather than taking out a large loan? If you haven't considered making a down payment, you've come to the right corner of the internet. If you're buying a new car but have yet to settle on an option, keep reading to discover the benefits of making a down payment on your new vehicle.
One of the most significant benefits of putting money down on a car is that the more you spend on a vehicle, the less money you'll have to borrow from the bank. Because you have a small loan, you'll have a lower balance, which you will pay interest on. Having less of a balance means that you'll also be paying less interest, which is certainly something we can all appreciate. If you're looking to spend less on interest and more on the actual vehicle, you should definitely consider making a down payment on your new car.
Get Approved for a Loan More Easily
When you put money down on a car, there is a good chance that you could have an easier time getting a loan. Putting a down payment on a vehicle could significantly benefit those with credit scores on the lower side of the spectrum. If you're struggling to raise your credit score, or you have a lower credit score, it's recommended by CreditKarma that you put a down payment on your new vehicle to not only have an easier time getting a loan but to help raise your credit score, as well.
Lower Monthly Payments
Another benefit of placing a down payment on a new car is the possibility of it lowering your monthly expenses. When you make a down payment on a vehicle, that amount is subtracted from the cost, and a loan typically covers the rest of the owed amount. The more money you put down, the less you must borrow and the less you have to pay back. The amount you owe on a loan is divided by the number of months in the loan terms, so your monthly payments would be lower if you paid more of a down payment. Suppose you're looking for a new vehicle and are interested in making a down payment. In that case, it's important to mention that tax refunds make great down payments, so consider waiting until you get your returns before making a decision.
You Could Qualify for a Special Program
Car dealerships offer all kinds of deals and financing programs for potential buyers, but many of those programs require a down payment. With a down payment, you may qualify for low-interest rates or other great incentives, so make sure you read the small print and understand what you agree to.
While most cars lose approximately 15% of their value yearly, new cars depreciate at an even faster rate. If you decide to purchase a new car but don't make a down payment, you could end up owing more for your vehicle than it's actually worth. If you end up owing more for your car than it's worth, you could have difficulty selling or trading in your vehicle because you might not get enough money for your car to cover the cost of the loan.
Making a down payment on your new car is a significant financial decision for you to make. If you'd like to save money on your monthly payments and interest rates, consider making a down payment when you go to the dealership. Give yourself some time to consider it, and use your tax refund to buy a new car this year!