Do I Need a Down Payment for a Car Loan?
Do I need a down payment for a car loan?
If you’re looking to get a car loan, you may have heard the term ‘down payment’ and be unsure about whether or not you need one. Whilst a car loan down payment can have specific advantages when getting a new car loan, it’s not essential and you can get a car loan without one.
To find out whether a down payment on a new car loan is the best option for you, speak to Positive Lending Solutions. Our decades of experience as well as our access to a wide range of lenders means that our expert team of brokers can quickly and easily direct you to the right new car loan for your needs.
Understanding down payments for a car loan
A down payment on a car loan is similar to a deposit on a loan such a home loan. It is an amount of money, which you put down – towards the overall price of the car.
You may have heard the term ‘principal payment’. This is a payment towards the amount of principal owed – with the principal being the amount of money that you owe from the bank or your lender. The principal payment does not include interest, which you will pay on the loan.
A down payment will be a payment towards the principal payment of your car loan.
Requirements for a down payment on a new car loan
It’s not essential to have a down payment if you’re looking to get a new car loan. It is possible to borrow the entire amount from your lender – but there may be cases where a lender will ask you for some sort of down payment.
If you have a history of bad credit, it may be harder for you to borrow the entire loan amount and a down payment could help your chances of getting a new car loan.
The benefits of a car loan down payment
If you can afford a car loan down payment, you could reap the benefits which come with borrowing less money overall from your lender.
The lender is reassured by a car loan down payment as even if you default on the loan, they will have already collected back some of the total amount owed.
Benefits of a car loan down payment include:
- Lower interest rates: you will be seen as a lower risk borrower and lenders may be prepared to give you a better (lower) interest rate if you are able to provide a car loan down payment.
- Shorter loan terms: you will be able to get a shorter loan term as you’ll be borrowing less money so should be able to pay it back quicker.
- Lower overall costs: if you consider that you’ll be paying less interest over a shorter time on your loan (which will be a reduced amount already), you’ll see substantial savings if you are able to offer a down payment new car loan.
How much to put down for a car loan down payment
This will depend on a variety of factors and you should never stretch yourself financially by tying up cash that you need for daily expenses. Consider the following when budgeting how much you can afford for a car loan down payment:
- Your monthly income
- Your monthly expenses and outgoing costs
- Your overall cash flow
- Other existing loans that you need to pay back
When you’re considering how much to put down for a car loan down payment, you should speak to your lender who may have a predetermined amount that they require. There is much quicker depreciation on a new car so often car loan down payments can be around 20% of the total purchase price.
If you are looking for a used car loan, you should consider putting down at least 10% as a car loan down payment. If you’re unsure about anything, it’s essential that you ask for expert help before going ahead with paying a car loan down payment – get expert advice from Positive Lending Solutions to give you the peace of mind that you’re taking the right steps.
Asking for help
Whether you want to speak to us directly or simply try our Quick Quote form online to figure out where you stand financially with a down payment for a new car loan, Positive Lending Solutions are here to help you.
With decades of experience helping people to get the right car loan for them, we understand whether or not you’ll need a car loan down payment and how it could benefit you. Access to a wide range of lenders and find the right lender for you. Contact Positive Lending Solutions today!