The benefits of car down payments for your next car are many and varied, but we all agree that using one is a significant benefit. So much so that we typically recommend using one on almost every loan we arrange.
We asked our Simcoe auto loan team to outline exactly what the benefits of car down payments are and this is what they came up with.
Smaller auto loan
The more you put down, the less you’ll have to borrow. The amount of down payment you can use is subtracted from the overall cost of the car so you’ll need to borrow less.
Lower monthly payments
Borrowing less means lower monthly payments, which can make a huge difference to the affordability of a loan. You could stretch the term to lower the payments but putting more money down has more benefits.
Lower interest rates
People in some situations can get better rates if they use a down payment. This can be true for bad credit car loans as well as standard loans. Use a down payment and it could actually pay for itself over the term of a loan.
Less risk of negative equity
If you’re buying a new car with a longer loan, putting money down means less chance of going upside down. The amount you use as a down payment can offset that initial burst of depreciation that happens when you first drive the car away.
While it doesn’t make difference over the long term, we know some people don’t like the idea of negative equity.
Shorter loan term
More money down, borrow less and potentially have a shorter loan term. If you can make the monthly payments, a smaller loan can mean a shorter term, so you can pay the loan off faster and pay less in interest.
Lenders are always reassured when you put your own money down. They are lending you a lot of money and knowing some of your own money is at stake reassures them that you’re less likely to default on the loan. This can sometimes be the difference between getting the loan and not.
Down payment and your next Simcoe auto loan
As you can see, the benefits of car down payments on an auto loan are many and varied. As long as it won’t completely deplete your savings and won’t leave you financially exposed in any other respect, the larger the down payment, the better!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!