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How Much Down Payment Should I Put on a Car?

If you’re looking at purchasing a new or pre-owned car in the Raleigh area, you may be wondering how large of a down payment on the car is necessary. While most lenders do require a down payment on a car, most will allow you to put down any amount you desire. A low car down payment shouldn’t prevent you from getting your preferred vehicle, but a larger down payment has the advantage of lowering the total amount owed and thus gets you a lower monthly payment. Learn more about down payments on cars in the guide below!

Why Do I Need to Make a Down Payment on a Car?

Lenders want the auto loans they approve in Cary and Apex to be as low-risk as possible for them. Part of lowering their risk is requiring at least some amount of down payment on a car. It shows the lender that the borrower is serious about the purchase and provides them with some upfront compensation.

What’s the Average Down Payment on a Car?

The down payment you make on a car is like an upfront payment that encompasses a certain percentage of the total purchase price. The more you pay upfront in a down payment, the less you will owe moving forward.

The general recommendation for how much down payment to put on a car is at least 20% for new cars and at least 10% for used cars. However, a 2019 analysis conducted by Edmunds found that the average down payment on a car, for both new and used cars, was 11.7%.

What’s the bottom line when determining the down payment you will make? A larger down payment is always ideal, but car-buyers should take their unique budget into consideration. Choose an amount that you’re confident you can save up without stressing your other finances or dipping into emergency funds.

Benefits of a Larger Down Payment

A low car down payment will be acceptable by most lenders’ standards, so don’t be worried if you’re unable to put down 20% or more. However, if time is on your side and you can spend a few more months saving for a larger down payment, there are quite a few advantages to consider:

  • Less interest paid: The larger the down payment you make, the less interest you will pay over time.
  • Easier approval process: If you’re working with a lower credit score, making a larger down payment might make it easier to get approved for an auto loan.
  • Lower monthly payments: A large down payment decreases the total amount owed, so your monthly payment amount will also be lower.
  • Maintain positive equity: When you make a low down payment on a car, there’s a higher risk of becoming upside down on the loan (owing more than the car is worth) after depreciation. A larger down payment can ensure you maintain positive equity, meaning you owe less than the car is worth. This puts you at an advantage if you want to sell or trade in the vehicle in a few years.

Get Help with Financing at Hendrick Chevrolet Cary

Need help determining how much down payment on a car you should make? Contact us to speak with our friendly finance experts. Our team will take the time to get to know you and your budget, so we can make a good recommendation that’s tailored to you. Apply for pre-approval to get started today!

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*$699.00 Dealer Administrative Charge is not included in advertised price. All prices and offers are before state, city and county tax, tag, title and license fees. Out of state buyers are responsible for all state, county, city taxes and fees, as well as title/registration fees in the state that the vehicle will be registered. All prices and offers include all rebates and incentives which the dealer retains unless otherwise specifically provided. No General Motors incentives apply to pre-owned vehicles. All New vehicle prices exclude dealer installed accessories, lifted/leveled trucks, and aftermarket wheels. Dealer not responsible for errors and omissions; all offers subject to change without notice, please confirm listings with dealer. **All vehicles may not be physically located at this dealership but may be available for delivery through this location. Transportation charges may apply. Please contact the dealership for more specific information. All vehicles are subject to prior sale.

 

Offer Disclaimers

*120 Day Payment Deferral available when you finance through GM Financial. No down payment required. For well qualified buyers only. Not all customers will qualify. A+ and A1 credit required. See dealer for details. Select in stock inventory only. Cannot be combined with consumer cash or incentives. Must take delivery by 8/31/21. **0% APR for 72 months available when you finance through GM Financial. No down payment required. $13.89/month for every $1000 financed. For well qualified buyers only. 90 Day Payment Deferral available when you finance through GM Financial. No down payment required. For well qualified buyers only. Not all customers will qualify. A+ and A1 credit required. See dealer for details. Select in stock inventory only. Cannot be combined with consumer cash or incentives. Must take delivery by 8/31/21. Applies to 2021 Equinox, Trax, Blazer, Traverse

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