What is the Right Down Payment for You?

We are here to guide you to figure out what the best long term plan is for your car ownership.  A down payment can play a considerable role in avoiding getting turned upside down or owing more on your car than its worth on your auto loan.  While, you may be able to put 0 down it might not be the best option for you.

According to edmunds.com “…many people just want to pay the bare minimum down in order to get the payments and interest rate to a point that fits their budget. But this approach ignores an important factor: depreciation.” “Currently, new cars have an average depreciation of 21.8 percent after the first year of use,” says Joe Spina, senior manager of remarketing for Edmunds.com.

Having a low down payment — or no down payment — instantly turns the loan upside down for the car purchase. Thanks to aforementioned car depreciation, which begins the second you pull off the dealership parking lot, the buyer owes more than the car is worth. So, in order to avoid this financial stress.  Figure out what is the right down payment for you by following our steps to determining the right down payment for you below:

Get Your Credit Report:

Once you have the report, read it! This may sound obvious but, more often than not people will see the score and call it a day.  You should really look over it carefully.  Take the time to make sure that you haven’t become a victim of Identity Theft by verifying that all of the debts listed are in fact yours. If you notice that something is incorrect make an effort to get it corrected by not only contacting the credit reporting agency, but also the company that claims the debt. Get these issues straightened out before you move on. 

Select a Vehicle:

A good starting point is to outline exactly what the vehicle will be used for and the highest priorities for it to meet your needs.  For example, if you are looking for a commuter car and you are a single professional,  you may have MPGs as your highest priority.  It’s best to know what you are looking for, so that you know the potential total cost.  This way you are able to gauge the down payment figures off of the total cost. 

Start Saving:

A good benchmark for anyone buying a car is 20% that way you offset the majority of the first year of depreciation up front.  It’s not always necessary to have a down payment especially if you have a Great Credit Score, but there is always taxes/tags and while a 20% down payment may not be mandatory it would be better for the health of the loan.  Now, not everyone can save 20% of a car purchase price, it is a lot of money, so if you have what you would consider to be a Good Credit Score we recommend having at least 5-10% down of the total cost plus taxes & tags.  On the other hand if you have a Bad Credit Score we recommend saving as much as possible for the down payment, while it may be difficult 25-30% is a good goal including taxes & tags.  In all honesty the down payment really depends on the details of your credit history, but these are basic recommendations to help you at least set a standard for yourself. 

Hope this helps! Submit any questions in the comments section below or if you would like to reach out to our Business Manager directly email Don Hannum at DHannum@academyfordsales.com

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