People often ask us “How much money down” or “How much of a down payment do I need?” The answer is always “it depends”. It depends on your credit, how much of a monthly note you can afford, and how much does the car you are looking at cost.
There is a better question to ask. That question is “How much of a down payment do I want to put down?” The answer for that question is always “As much as you can!” No doubt about it. Let’s examine why.
• A bigger down payment will lower your monthly note. It’s simple math.
• A bigger down payment can lower your interest rate. The reason is the bank is having to take less of a risk on you because you are putting more money down. And less risk can equal a lower interest rate.
• If you can put a bigger down payment then you will get into an equity situation faster with the car you are buying. Which again can equal less risk for the bank which in turn can yield a lower interest rate for you.
• The more money you are willing to put down can mean you can afford a better car. Again, simple math here. A nice car is typically more expensive, and the more you can put down means the less amount you have to finance which in turn equals a lower monthly payment.
So when you think about it that way, a down payment is a positive thing. Most people think of down payments from a negative perspective, as if they are having to give up money. However when you think about how a down payment affects the whole car buying process, bigger down payments have a positive effect. For that reason we always say “put down the biggest down payment you can afford”.