The Benefits of Car Down Payments in Milton

The Benefits of Car Down Payments in Milton

Posted on June 30, 2021

Most auto loan companies recommend putting money down when buying a new car. It’s one of the many universal recommendations we all make when discussing car finance, but why? Our Milton auto loan team outlines several benefits of car down payments you can use to make a decision on the next car you buy.

The Benefits of Car Down down payments

There’s a balance that needs to be struck between delaying the new car purchase long enough to save for the down payment and the benefits that payment will bring.

It is worth saving for though:

To lower the auto loan amount

The more money you put down as a deposit, the less you’ll need to borrow. This is a significant benefit of a down payment and one that cannot be overstated.

Auto loans are expensive and come with a significant monthly cost. The more you can do to reduce that cost, the better and one of the easiest ways is to use a down payment.

Increase your chances of getting the loan

All other things being equal, a lender is far more likely to offer to lend to someone with a down payment than someone without. While you can get no money down auto loans, they are tougher to get and often more expensive.

Putting your own money at risk reassures lenders. If you’re risking your own money, you’re less likely to risk it all by defaulting on the loan. Which is why they look so favourably on them.

Lower interest rates

Down payments don’t guarantee lower rates but they you will often see a more competitive rate if you use a down payment. For the reasons above, lenders regard those with down payments a lower risk, which get a lower rate.

Interest rates are not only the lender’s profit but also their hedge against risk. The higher the risk you are perceived to be, the higher the rate they will charge. The opposite is also true.

Prevent negative equity

If you’re buying a new car, your down payment can insulate you against negative equity. Owing more than your car is worth isn’t a comfortable feeling for some.

Putting money down and reducing the loan amount means there is a cushion between the amount of the loan and the amount of value the car loses through depreciation.

Shorten the loan term

More money down, the less you have to borrow, the shorter the term of the loan. Unless you’re looking to minimize monthly payments as much as possible, this option means you get to drive the car you want while keep the loan term short.

This leaves you free and clear for longer or means you can upgrade your car sooner, whichever works best for you.

There are many benefits to using a down payment and these are just a few of them. They make a real difference to the loan terms and should be used wherever possible.

It is possible to get a no money down auto loan in Milton, but if you can save for a down payment, we thoroughly recommend it.

Contact Unique Chrysler for help, advice and competitive Halton car finance and leasing.

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