If you’re preparing to purchase a car, one thing you’ve likely thought about is your down payment. Down payments are a general part of the car buying process, and buyers will need to be prepared before heading to the dealership. Today we’re going to explore three options you have when it comes to your down payment. Additionally, we’re going to share a few tips to help you save.
1. 20% Down Payment
A 20% down payment is the ideal scenario. It will afford you a lower car note and a lower interest rate, and it’ll help you miss the bulk of depreciation that vehicles face.
However, not everyone can afford to put 20% down on a vehicle. It’s also important to note that it isn’t always necessary. If 20% feels like it’s stretching your budget, it’s probably best to save some of that cash.
2. No Down Payment
This is another option that’s mainly reserved for those with stellar credit. Providing no payment is a great way to keep money in your pocket.
This is a great incentive if you want to set money to the side to make monthly payments or create an emergency fund for yourself. But keep in mind that putting 0% down will lead to higher monthly payments and finance charges. With that said, it’s best to put something down unless you’re not in the position to do so.
3. As Much as You Can Save
This is the area where many buyers will measure up. The third option is to put as much as you can down.
You might not be putting the ideal 20% but you’re also not putting 0% down, which will offer better incentives. Ultimately, putting as much money as possible down on your vehicle can still lead to a relatively lower car note and better terms overall.
At the same time, not putting the entire 20% allows you to save a little money in the process, which can make this option the perfect sweet spot.
Tips to Save for Your Down Payment
Here are three tips to save for your car down payment:
1. Create a budget: This will give you a better spending plan and allow you to take control so that you can effectively save for your down payment.
2. Reduce spending: Be sure to stop any unnecessary spending and begin to put that money into a savings account so that you can have a good amount of money saved up when you’re ready to purchase.
3. Reduce credit card usage: Relying too heavily on credit cards only creates more bills. By reducing your credit card usage, you will simultaneously reduce debt load.
There is no perfect answer when it comes to your down payment. But what you choose to do will depend on what’s most important to you and what you’re in the position to offer.
With that said, if you’re currently preparing to purchase a car, be sure to follow the best practices that will enable you to save for your down payment.