The best and probably the most conclusive answer to how much down payment should you pay for your used car is as much as you can. If possible, buy it fully with cash and you will never have to worry about credits and financing at all. But that is seldom a reality for many modern-day willing buyers as cars have become 33% more expensive than what it was back in 2007 but the average income of US citizens has not risen that much. Hence, consumers are increasingly turning towards auto loans and the question of down payments naturally comes in. The concern is about affordability right now and also the financial bigger picture.
What is down payment exactly?
Let’s start the discussion from the very basics of things. A down payment is the amount of money you pay upfront while buying a new or used vehicle with an auto loan. Obviously, the initial sum will bring down the loan amount you will have to request the lender and consequently, the interest and the timespan of that credit. In simple words, imagine you are buying a used car for $10,000 and pay a down payment of $5,000, you will now have to request for a loan of $5,000 to cover the pending amount. Understandably, the interest on $5,000 will be a lot less than what you would have to pay if you had taken the entire car’s price as loan and you can repay the $5,000 faster as well.
The higher the down payment, the better
The top used car dealerships in Greenville, South Carolina, will allow you the offer of flexible payment where you can choose the amount of down payment that you want to pay upfront. A high down payment will bring down your interest payments along with the monthly sum that you will have to pay regularly. This will keep your budget in check and give you better control of your finances.
Another benefit of a high down payment is depreciation offset. Every used car depreciates in value over time. Or, it loses a considerable chunk from its initial value. The insurance you take on your car is also given out accordingly. Now, say you took the total $10,000 as an auto loan and your car gets totaled within the first year, your insurance will pay you less than what you owe for the car due to depreciation. With a down payment, you stay in safe territories. Even if the worse happens, your insurance takes care of the remaining amount.
So, how much should you pay?
You may not be able to afford 50% of the car’s price as a down payment. That may certainly be too steep. The rule of thumb that has been followed through ages places the optimum figure as 20% of the car’s price. However, for used cars or used trucks in Greenville, SC, you can go as low as 10% as used vehicles depreciate at a much lower rate as compared to new cars for which the 20%-rule stands. By paying 10%, you can take advantage of all the three major benefits of a high down payment – low interest, depreciation offset, and low monthly payments.
But 10% might also be quite steep
There is no denying that $1,000 as down payment may also appear to be steep. Plus, if you are looking at a used vehicle that costs higher, this figure will also naturally rise. In such cases, you can search for used car dealerships near me who offer $500 down or zero-down auto loans. Here, you can drive home a used car with a mere $500 or without paying any down payment at all.
However, most zero-down dealerships require you to have a good credit score. The business obviously becomes risky to sell you a car when your FICO score is not impressive and the lenders look for some assurance. The case is not so with $500 down. With a moderate credit score, you can avail this offer at the top buy here pay here car lots like Family Auto where all buyers are approved despite what their credit score has to say. In short, you can sleep peacefully at night with this thought in mind that your down payment to buy a car can vary from $0 to “as much as you want”. There is no minimum or maximum cap.
Do your calculations
And visit the top used car dealerships in Greenville, South Carolina, where you get a variety of options with down payments. For instance, trading in your old car can also help to raise the down payment amount that you can afford which good dealerships allow you to do. Plus, dealership offers and discounts may also serve as added benefits that will ultimately help your finances. So, do your calculations, research for top dealerships, pay the down payment you can afford, and get yourself that much-awaited car.