How Much Is a Down Payment on a Car?
When you buy something as big as a car, it helps to put some money down initially. This is to cover a portion of the overall price, which can make paying for a car loan easier.
However, you may be wondering how much a down payment on a car is. Our team at Ira Toyota of Tewksbury will go over that below along with some of the benefits of a down payment.
Read through our informative guide and contact our dealership near Lowell, Dracut, and Tewksbury if you have any questions.
Down Payment for New & Used Cars
The recommended amount to put down initially depends on whether you buy a new or used car.
- If you’re looking to buy a new car, then it’s suggested to put down 20% of the vehicle’s asking price.
- To buy a used car, you generally want to make a down payment of 10% of the car’s sale price.
Either way, this is done so you can stay above water and not owe more than what the car is worth.
You can get the money for a down payment in one of two ways. You can save up by cutting down on any extra expenses or by taking a small part of your paycheck each month to put toward a new car. You could also use your current ride (if you have one) as a trade-in.
If you’re thinking of trading in one car for another, you’ll want to get an idea of what it’s worth. You can use various tools, such as Edmunds® and Kelley Blue Book®, to get an estimated value. However, for a more accurate amount, you’ll want to visit your local dealership for an in-person evaluation.
A staff member will look at the condition of your car. They’ll then factor that into the vehicle’s worth along with any special features that the car may have, such as leather seating or a navigation system.
Then, you can take the amount and use it as a down payment to make the process as convenient for you as possible.
Benefits of a Down Payment on a Car
There are many advantages to putting some money down initially when buying a car. When you apply a down payment, you can get the following on an auto loan:
- Lower interest rate
- Lower monthly payments
- Shorter length of loan
Putting money down initially lowers the amount you need to borrow from a lender. By reducing the amount of money to finance, you’ll be able to save on interest charges. Plus, if the loan is small overall, then your payments each month would be, too.
A down payment can also help you avoid getting any negative equity—when you owe more on a loan than what the vehicle is worth. This can happen simply from cars depreciating in value over time. If you ever want to sell or trade in your vehicle down the road, you may need to cover the difference between what you owe and what the car is worth ahead of time.
Still, a down payment can build equity. As a result, you may be able to avoid getting negative equity, which will make things easier come sell or trade-in time.
Start Shopping for an Automobile Today!
As you can see, there are many benefits to applying a down payment to a new automobile. So, if you have any questions or are ready to buy a car, then contact Ira Toyota of Tewksbury. We’ll guide you through each step of the buying process, including that down payment step.
Don’t wait. Start shopping for a new ride near Lowell, Dracut, or Tewksbury today!