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Down Payment Tips

A big part of car buying and fast auto financing is determining how big of a down payment you need to make. Small down payments aren't always the best idea. On the other hand, you don't have to slavishly adhere to the 20% rule, either. Here are some tips to help you figure out your down payment.

What a Down Payment Can Do for You

When looking into fast auto financing, you'll need to consider the amount of your down payment. Here are some things a down payment can do for you.

  • Lower your monthly payments
  • Reduce your interest expenses
  • Build equity in your car faster
  • Keep you from becoming "upside down" in your loan
  • Put you in a better position to sell sooner
  • Open up options for credit-challenged customers
  • Mitigate the depreciation curve on your new car
In general, the larger the down payment, the less likely you'll end up upside down for an extended period.

The 20% Rule

Financial experts have long recommended making a down payment of 20% of the car's total price. Though this made sense in past lending climates, things have changed dramatically. With fast auto financing, you have much more flexibility. Some of our lenders won't require a down payment at all, while others require as little as 3-5%. You certainly don't have to make a down payment of 20% if you don't want to or just don't have the money right now. However, keep in mind that you will want to make the largest down payment possible to reap the benefits mentioned earlier.

Upside Down

To be upside down in your fast auto financing loan means that you owe more on your vehicle than it's worth. Almost all new car transactions experience at least a brief period of being upside down. For example, if you make a 10% or 20% down payment and your car depreciates by 25% in the first 90 days, then you will be upside down in your loan. Being upside down in the loan is not necessarily a huge problem unless you remain that way for years into the loan. In general, the larger the down payment, the less likely you'll end up upside down for an extended period. See our home page for more about fast auto financing services.