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Do I need to make a down payment before getting a car?
This is my first time buying a car, and I’m trying to understand how car-related finances work. I’m already planning on paying on my loan every month. Do I still need to make a down payment?
Joshua Levy · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Car loans
can be complicated—especially for first-time car owners. But you should usually make a down payment on your car loan, even if you aren’t required to. Here are the three biggest reasons for making a down payment:
- To prevent you from going upside-down on your loan: Your car’s value depreciates by about 20% after the first year. As a result, people who don’t make a down payment can find themselves in anupside-down loan—a situation where you owe more on your car than it’s worth. Making a down payment can ensure that you owe a more reasonable amount on your car relative to your equity in it.
- Raise your chances of loan approval: Making a big down payment to your lender is an easy way to reduce their risk and make you seem like an ideal applicant.
- Secure better rates: Once you’ve made a down payment, your lender may also be more willing to reason with you. This means that you can typically secure a betterinterest rateandlower monthly payments.
While you won’t usually be required to make a down payment to buy your car, doing so can drastically improve your financial situation. But if you still end up with bad terms and a high interest rate, you can always try refinancing with
Jerry
.A licensed broker, the Jerry app instantly connects you with top companies to meet your refinancing needs. That way, you can make sure you’re not overpaying for your car loan by comparing offers from multiple lenders and finding the best option for you.
View full answer
- Gregory R.
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