Your car is either the most expensive or second most expensive purchase (after your home) that you’ll make. Anything you can do to lower the monthly payments to cover that purchase, the better off you’ll be.
One way to do that is with a down payment.
Down payments and car loans
While there are a number of no money down car loans, the most common type of car loan is the standard loan with down payment. That down payment can play a significant role in whether your loan application is accepted or declined.
It can also play a part in the affordability of the loan.
A car loan can help with:
- Improving your chances of loan approval – Lowering the amount of the loan and providing a down payment lowers the perceived risk of the loan. This will improve your chances of acceptance.
- Lower loan amount – The more you pay up front, the less you’ll have to borrow.
- Better affordability – The lower the loan amount, the lower the monthly payment.
Why do lenders like down payments?
Lenders like down payments because it lowers their risk. Any down payment you make would be forfeited if you defaulted on the loan, meaning less loss for the lender.
It also means the value lost through depreciation is covered in those early months of the car loan. Again, lowering the perceived risk to the lender.
How much of a down payment should I plan for?
The short answer is, the more the better. Lenders tend to look favourably on down payments of between 10% and 20% of the purchase price. If you want to pay more, you can. If you want to pay less, we may have to look at specific lenders.
The more money you can afford to put down, the lower the value of the loan compared to the value of the car. This increases your chances of being accepted for the loan.
Lowering the value of the loan will also lower your monthly payments. You can either keep those lower payments or go for a shorter loan term with higher payments. It is entirely up to you.
Car loans with no down payment
If you’re not in a position to make a down payment on a car, you can still access a car loan. We work with some specialist lenders who provide no money down car loans.
They may be more expensive over the term but if you need a car and cannot save for a deposit, they are an option.
Whatever your situation and whatever your car loan needs, we can help. Contact our team to see what we can do for you.