You Should Make A Down Payment With Your Car Loan

You Should Make A Down Payment With Your Car Loan

Posted on April 13, 2021

You will often see recommendations for making a down payment along with an auto loan. There are some compelling reasons to put your own money down and this blog will provide five of the best.

We set our Glen Abbey auto loan team the task of coming up with the five most popular reasons we think everyone should make a down payment on a car.

1.   Borrow less on the Glen Abbey auto loan

The first, most logical reason is to reduce the amount of loan you’ll need for the car. The more you put down as a deposit, the less you’ll have to borrow as an auto loan.

A lower loan amount provides some of the other benefits we’ll cover in the post, including:

2.   Lower monthly payments

Borrowing less on the Glen Abbey auto loan means either lower monthly payments or a shorter loan term, whichever works best. Most of our customers choose the lower monthly payments to help balance all the other expenses that fill our lives, or empty our bank accounts!

You can choose to pay less per month over the same term or choose a shorter term with the same loan payments. Which you choose is an individual decision.

3.   Pay less interest

The lower the Glen Abbey auto loan amount, the less interest you’ll pay. As interest is applied to the amount you borrow, if you need less, you’ll pay less.

Some auto loans offer lower interest rates for higher amounts or longer terms. If you see these, you’ll have to calculate whether it’s worth borrowing over the longer term or borrowing a little more versus borrowing the original amount. We can help with that calculation if you need us to.

4.   Easier approval

If you put more money down, lenders are more likely to approve the loan. The more money you have in the game, the more relaxed a lender will feel about approving the loan.

Someone with a lot of cash at stake is far less likely to default on the loan. Even if you do, they can repossess the car and make their money back that way anyway.

Both scenarios mean all things being equal, a lender is far more likely to approve someone with a larger down payment than a smaller one.

Plus, a smaller overall loan amount can also contribute to a higher chance of loan approval. It’s a win win!

5.   Offset depreciation on new models

If you’re buying a new car, a larger down payment can prevent you going upside down. It can cover that initial depreciation all new cars experience in their first year.

While being upside down in an auto loan is nothing to worry about, some people just don’t like the idea of it. A larger down payment can avoid the situation.

We would always recommend making as large a down payment as possible. For all those reasons above, it makes sense to save as much as you can and use it alongside a trade in and a Glen Abbey auto loan.

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

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