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Car Down Payments: Are They Really Necessary?

Car Down Payments: Are They Really Necessary?

Saving up thousands of dollars for a car down payment can be extremely difficult between everyday bills and expenses. Commercials flash promises of zero down financed cars. So what is a down payment and is it really necessary to come up with one? Car down payments act as a show of good faith when you are looking to finance a car. The best way to understand why down payments are necessary is to place yourself in the shoes of the lender. Imagine owning a $15k vehicle and a person you have never met comes by and wants to drive away in it based off a promise to slowly pay you over the next three to five years. Them being a stranger, you are extremely wary to allow this. If they drive away and never honor their word to pay, you are out $15k. However; if the stranger shows up with $2k and wants to drive away with a promise to slowly pay you the remaining balance you might be more likely to take the deal. Having a down payment shows that a person can save and be dedicated towards reaching a financial goal.

So how much should you save for a down payment? That depends on the lender and your credit.

If you are looking to use your credit you may be able to walk into a dealership with little to no down payment. Good credit shows the lender that you are very likely to honor your agreement to pay. If you do not have good credit or do not want to use it, you will have to show how willing you are to make payments by providing a down payment. The less information you are willing to provide about yourself and your financial past the more you should plan on saving. On our Buy Here Pay Here lot at Airport Auto Sales, a good place to start is $1k. However; the more you are able to save, the better.

While you don’t have to put any more money down than what is required, putting more money down can be beneficial. Down payments are always applied to your principal balance. After you drive away from the car dealership, every payment you make will have a portion that goes directly to interest. By placing more money down as part of your down payment, you are able to ensure that you acquire less interest. While our Buy Here Pay Here lot at Airport Auto Sales does not have any prepayment penalties, many other lenders do. Therefore; the down payment may be your only chance to save on interest. All in all; more money down in the beginning will save you money overall. Putting more money down will also reduce how much your car payments will be. So if you are unable to afford over a certain amount a month you can ask your salesperson how much you would need to put down to ensure the car payment you are most comfortable with.

While saving several thousands can be difficult between groceries, rent, and kids, a larger down payment will save you money in the end and make car payments more affordable. Planning for what kind of a down payment you need to save for can start with your salesperson. Come on by our Buy Here Pay Here lot at Airport Auto Sales and meet your salesperson. Let them know what kind of car you would like and what kind of payments you are looking for and they can help you reach your goals.

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