Traditionally, buying a car meant putting 20 percent down. However, the cost of new vehicles has risen dramatically over the years. In fact, according to automotive resource Edmunds, car buyers today put only about 12 percent down.
But should you put any money down at all when buying a vehicle? Putting as much as possible down on a new or used vehicle has important advantages. It makes your monthly payments smaller, and, if you’re buying new, it can offset the depreciation that takes place when you drive off the lot, adds Edmunds. - a full 20 percent in the first year alone. If you put down very little or no down payment at all, you’ll owe more on your car than it’s worth, you’ll have higher monthly payments and higher finance charges.
Simply put, it’s better to put money down when buying a car, but your down payment should be one you can reasonably afford. Depending on the condition of your current car, your trade-in can be your down payment, or at least part of it.
If you’re buying used, know that used cars don’t depreciate as fast as new ones, but if you buy from a dealership the price has likely been jacked up. According to Edmunds down payments on used cars bought from a private party are around 12 percent of the selling price, so if you buy from a dealership, you should negotiate, and hold onto the car for at least two years so you don’t lose money.
It is possible to buy with zero percent down, but you have to have stellar credit to be approved to do so. If it isn’t stellar, making a larger down payment will give you a better chance of getting your car loan approved.
Douglas Automotive : 123 E. Virginia, Crystal Lake, IL 815.356.0440 : 417 W. Main Street, Barrington, IL : 847.381.0454 : 416 Northwest Highway, Fox River Grove, IL : 847.639.4552 : www.douglasautomotive.com