Down the Payment Lane: How a Down Payment plays an Important Role in Auto Loans?

Not sure how putting more money down is beneficial? With the current inclination of lenders towards low risk and the long-term benefit of greater savings, a lot can be said about down payments. Understand and explore more about the different ways...
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Feb. 7, 2018 - PRLog -- The first thing to cross any car buyer's mind is to set the correct numbers in place. When you are in the market to purchase a car, one of the biggest questions you will seek to answer is whether you should put your money in savings while paying a higher monthly expense or pay a considerable down payment and score a comfortable monthly payment? The answer depends on various different factors. In order to understand the importance of a down payment, consider the following factors before you make your decision.

Is Down Payment the Right Solution for you?

1) Lender Inclination towards Low-Risk


Financing a car means big numbers. When lenders receive large down payments, the subsequent financial risk associated with long-term loans reduces. According to a Forbes report, TransUnion, a credit reporting agency, predicted that 2018 will see a shift in the trend where lenders will focus on low-risk auto loans. It means it will be beneficial for customers willing to opt for high down payments. Therefore, putting money down while purchasing your next dream car is advantageous in the long run.

2) Beyond Subprime Credit

According to Bloomberg, 9.7% of subprime auto loans cater to delinquency of more than 90 days. Most non-bank lenders are opting for high-risk lending which is increasing the number on a regular basis. But, it won't remain the same. If you want to obtain an auto loan with subprime credit, you will have to diligent than before. Lenders see an upfront payment as financial stability. Once a high down payment is combined with job stability, the overall credibility of an individual increases. The ideal ratio of a down payment is 20% of the total car loan amount. However, the higher the money you put down, the higher your chances of gaining creditworthiness in the eyes of the lender.

3) Savings Mechanism

As against putting less money down, a larger down payment helps you save in the long run. The money you save by paying an initial large amount turns out to be helpful for you in the long run. As high down payments are associated with increased credibility, you can negotiate your way into lower interest rates and gain high equity on your car. Kelly Blue Book notes that the average price of a light vehicle was $36,270 in January 2018. It is up by 3.9 percent from last year. As cars are becoming expensive, it is a wise decision to make purchases that pay off in the future. So, low interest rates become cost-efficient. Thus, down payments help you save the money that you can then invest elsewhere.

The Down Payment Decision: The Final Word

Putting money down is considered as a wise decision when you are purchasing a car. While you may have come across "Zero Money Down" offers ( https://www.rapidcarloans.net/some-facts-about-no-money-d... ), you should be aware of your personal finances and the additional costs that are added to the auto loan. Therefore, a down payment serves to be in your best car buying interests as it cushions your financial strength for the coming years.

Down payment is important while making a purchase. But, sometimes, you need to buy a car immediately and cannot wait to save money. Find a bad credit auto financing company such as https://rapidcarloans.net who understands your urgency of buying a car and offers you zero money down auto loans. It will help you make a quick car purchase without down payment.

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