Continue reading to find out more about car down payments, including how they operate, how much to budget, and how to buy a car without putting down any money.
If you are looking to buy a new car, you have likely come across the term “down payment. As the name implies, this is the sum of money you pay in advance to a dealership, with a financing agreement covering the remaining balance.
Your down payment as a car buyer can be in the form of cash or even a trade-in of your existing car. Making a down payment has the benefit of lowering your monthly payments, but there might be other considerations as well, so it’s a good idea to look into your options.
An alternative that might be preferable for individuals who don’t want to worry about making a down payment is a FINN car subscription. There is no down payment required when using FINN; your monthly payment takes care of the car, insurance, maintenance, and even delivery of the vehicle to your home.
When buying a car, you might be wondering where your down payment goes. Does it go to the dealer or the bank? The answer is: it depends.
If you’re financing your car through the dealership, your down payment will typically go to the dealership. The dealership will then use this money to reduce the amount you need to finance. This can save you money on interest charges in the long run.
If you’re financing your car through a bank or credit union, your down payment will typically go directly to the lender. The lender will then use this money to reduce the amount you need to borrow. This can also save you money on interest charges.
Here’s a breakdown of where your down payment might go, depending on your financing situation:
Financing through the dealership:
- Down payment goes to the dealership.
- Dealership uses the down payment to reduce the amount you need to finance.
- You make monthly payments to the dealership.
Financing through a bank or credit union:
- Down payment goes directly to the lender.
- Lender uses the down payment to reduce the amount you need to borrow.
- You make monthly payments to the lender.
Here are some additional things to keep in mind about down payments:
- The amount of your down payment will affect your monthly payment. A larger down payment will result in a lower monthly payment.
- Down payments are typically a percentage of the car’s purchase price.
- Some lenders may require a down payment, while others may not.
- You can use a trade-in vehicle as a down payment.
Here are some frequently asked questions about down payments:
- How much should I put down on a car?
The amount you put down on a car is up to you. However, it’s generally a good idea to put down as much as you can afford. This will help you save money on interest charges and reduce your risk of being upside down on your loan. - What happens if I don’t have enough money for a down payment?
If you don’t have enough money for a down payment, you may still be able to get a car loan. However, you may have to pay a higher interest rate or make a larger monthly payment. - Can I use a trade-in vehicle as a down payment?
Yes, you can use a trade-in vehicle as a down payment. The value of your trade-in will be deducted from the purchase price of your new car.
Here are some additional resources that you may find helpful:
- CarsDirect Auto Loan Calculator: https://www.carsdirect.com/auto-loans/car-loan-calculator
- Bankrate Auto Loan Calculator: https://www.bankrate.com/loans/auto-loans/auto-loan-calculator/
- Credit Karma Auto Loan Calculator: https://www.creditkarma.com/auto/loan-calculator
Can you get a car with no down payment?
Even though making a down payment on a new car has many advantages, not everyone has the resources or desire to do so. Fortunately, most dealerships will allow you to still purchase a vehicle on finance. However, the downside is that you will likely pay more over the life of your loan. This is due to the fact that you will probably have to pay more in interest as well as have to take out a larger loan to pay for the car.
In light of this, before choosing this course, you should definitely calculate the total cost of skipping a down payment on a new car.
With a FINN subscription, there is no down payment to worry about. Furthermore, FINN’s application procedure has a minimum credit score requirement of 640, which is substantially lower than the 700 score that many dealerships demand. Check out our $0 down car offers today.
Consider adding a co-signer
Interest rates are determined by the lending industry using a variety of factors, one of which is the probability that a borrower will be able to repay their loan in full. This may be especially true for people who have a short credit history or a history of missed payments.
Thankfully, a lot of dealerships let you add a cosigner to your loan agreement—like a parent or partner. This could lower your interest rate and make your monthly payments more affordable. Nevertheless, it’s crucial to remember that a cosigner also takes on loan responsibility. This means that if you default on your payments, the cosigner will be legally obligated to make them. Before you sign any agreements, it is advisable to discuss the full implications of this option with your potential cosigner due to the shared debt burden.