Financing a bad debt in general, like an auto loan, is not the most enjoyable thing. The fact that you’re already losing 20% of the value of your purchase the moment you drive it out of the lot is a terrible reality. Unless you have other convenient means of transportation, you have no choice but to swallow this bitter pill.
That being said, it’s in your best interests to make your loan easier to repay. One of the ways to do it is to put down a reasonable amount to lower the overall cost of your auto loan. In addition, making a down payment keeps your loan from becoming upside down.
Now, here’s the million-dollar question: how much should you pay? The larger amount is always better, but sometimes unnecessary. If you’re undecided you on how much exactly should you pay initially, just remember you must save up to 20% or more of the total loan amount.
If You Have a Bad Credit
Having a less than pristine credit decreases your number of attractive auto loans in Indianapolis, Milwaukee, or any U.S. city. If your FICO score is far from 850, chances are, you’re bound to pay for a high interest rate just to borrow the money you need for the car.
If You’re Buying a New Vehicle
As brand-new vehicles from Blossom Chevrolet cost more than the used ones, it would take a longer time to pay off a new car. Unless you pay a large down payment, you’d have to count several years to call it your own. Nothing beats driving a payment-free vehicle for a long time.
If the Lowest Interest Rate Is 7%
Low interest rates are ubiquitous these days, but if you can’t secure any deal lower than a 7% rate, then it’s better to save for a large down payment and wait until you really must buy the vehicle. Actually, you might even have more negotiation power if you’re capable to put down a huge amount.
Your down payment has to be strategic. You need to assess your entire situation first before you save up for the right amount to put down, and make your loan a better deal.