Advantages of a down payment |


A down payment is an amount paid up front when you buy a vehicle.

A down payment will save you money on interest, help keep your monthly payments low, and prevent you from going underwater or owing more than your car’s value.

Credit Karma describes the benefits of putting money into the purchase of a vehicle.

Less interest, less payments

Any money you put on the loan principle as a down payment will reduce the amount of interest you pay over the life of the loan. It can save you hundreds of dollars.

According to Credit Karma, a 20% down payment of $ 6,000 for a $ 30,000 vehicle could save you $ 711 on a five-year loan at an interest rate of 4.5%. On the same loan, your monthly payments could be $ 112 less per month with a down payment of $ 6,000.

More loan options

A down payment can make you a more attractive borrower to lenders. This means that you are more likely to get approved for a loan and could get a lower interest rate. This is especially true if you have a low credit score or other credit problems. Without a down payment, the risk to the lender that you might default on the loan is higher.

In addition, some dealer finance programs with low rates or other incentives require a larger down payment.

You can offset depreciation

Vehicles typically lose about 15% of their value each year, but new cars can lose 25% or more of their value in their first year, according to Credit Karma. Making a down payment could help you avoid owing more than the car’s value on the road. If you’ve ever been upside down on a car, you know this can cause difficulty in selling or trading in the vehicle later.


About Matthew R. Dailey

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