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How Much Money Should You Put Down on a New Car?

You are finally ready to buy a new car. You have searched and researched, and saved up for a down payment. According to an article by Forbes, the average new vehicle costs upwards of $36,000 and even at an 84-month term and a low-interest rate, your payment could be as much as $490 a month! So how much money should you put down on a new car to help with that overall cost and payment?


While you don’t have to put money down on a car loan, we do recommend it. Sometimes your lender may require a down payment to be able to write the loan. Why? Well, there are plenty of reasons, but here is a short list:

- You will likely get a better (longer) term on your loan.
- You might get a lower interest rate because you are not financing as much.
- A down payment also increases your likelihood to receive the loan. It shows your lender you are serious about repayment.

Most experts say 20% down on a vehicle purchase is a good place to start. On $36,000 that is about $7,200. The overall amount you would finance would be $28,800, and with an 84-month term, your payment is about $100 less a month. Not to mention the amount of interest you are going to save by putting money down.

Another bonus of a down payment is the wiggle room. Because you are financing less than the car is worth (hopefully), should something come up you could use the equity in your vehicle to help you out. Sometimes, even consolidating debt into your vehicle loan can be a good decision because of the interest rate. Generally, vehicle loans are what we refer to as “secured” loans which means we are securing the loan with something tangible (your car). In the event you can’t make your payments, we can repossess the vehicle and recoup some of the expenses. Loans that are considered “secure” have a lower interest than other forms of loans.

Your loan officer will also appreciate a down payment. As we said above, this shows them you are serious about the vehicle and the loan. Unfortunately, we do see people who come in for a loan and never make a payment. As a result, their credit is negatively affected in a matter of months, and our collections team is looking to take the vehicle back.

Well, there you have it! All you need to know about down payments on vehicle loans. I highly recommend putting 20% down if you can, but any down payment will help save you money over the life of your loan.

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