BENEFITS OF A DOWN PAYMENT
If you’re planning on buying a new or pre-owned vehicle, a down payment is the upfront money you put towards the loan. Most lenders require a down payment, and even if it’s not needed, a down payment has several advantages. At Rhinelander Buick GMC, we’ve compiled a few reasons why it should be considered.
Understanding A Down Payment
If you think of your down payment as the first auto loan payment, it makes much more sense why these funds are needed. For example, if the vehicle you want costs $40,000, and you plan to put down ten percent, the down payment would be $4,000. Also, your trade-in value can be used combined with your money to help cover those expenses. Lenders often require them because they want to know that you’re committed to a loan. Let’s take a look at some benefits to you (the buyer).
1. Save On Interest
It’s a simple fact to consider: If you put more funds toward the loan, you’ll be borrowing less. As a result, over time, you’ll save a good chunk of change on interest. Sometimes, you can even qualify for a lower interest rate should you put a larger down payment towards financing. Don’t get worried about initial costs because you’ll make that money back plus some as time passes.
2. Easier Loan Process
One of the primary reasons of concern for buyers is getting approved for a loan on the vehicle they wish to buy. If you don’t have the best credit, making a down payment can help you get approved a little easier. This reaffirms to the lender that you’ll be able to make on-time payments.
3. Lower Monthly Payments
If you’re like anyone else buying a car, you want the monthly payment to be as low as possible. Down payments can help reduce the amount of the loan, thus meaning you’ll be paying less every month over the term. Saving even $100 a month can be valuable to individuals who have children or are on a tight budget.
4. Reduce Depreciation
Did you know that new vehicles can lose as much as 25 percent of their value within a few years? Applying a down payment can help prevent becoming “upside down” on the loan- meaning you owe more money than the value of the car.
5. Equity In Your Vehicle Is Important
Having some equity in your vehicle can give you the advantage, especially for unexpected circumstances. Let’s say you have totaled your vehicle, but you haven’t built up any equity. An insurance company will only pay the fair market value (not what you still owe). This scenario means that your responsible for the difference, which could end up being thousands of dollars.
6. Possibility of A Shorter Term For The Loan
Most car loan terms can last anywhere between two and eight years, with more common ones being 36, 48, 60, and 72. Putting forth a more considerable sum of money upfront could qualify you to move to a shorter term period.
7. Get Used To The Responsibility Of A Car Payment Again
Has it been a while since you financed a vehicle? Have you not made a payment on your car because you paid off the loan? A down payment can get you used to have that expense again so you can plan accordingly to integrate it into your monthly budget. Once your loan is paid off, there can be no better feeling than knowing you own the vehicle free and clear.
How Do I Know How Much Money To Put Towards A Down Payment?
There’s not a blanket percentage that works for everyone. The amount that you put towards a vehicle can depend mostly on your budget and what you’re comfortable with. Financial experts say that 20% is a good number to go for, but that doesn’t necessarily mean you have to. Examine your available funds, and take it from there.
Contact Your Premier Buick GMC Dealer Serving Rhinelander, Wisconsin!
Rhinelander Buick GMC has a group of friendly finance professionals that can help customers regarding understanding a down payment. Whether you’re planning to pay cash, use your trade-in, or both, we can help make sure the process is done correctly. If you’re interested in any new or used Buick, GMC, or Chevy, we are glad to discuss it further with you. Check out our inventory online and get pre-qualified for financing in a matter of seconds. We look forward to seeing you here!