What determines my down payment amount for my new car?

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Every Car Dealership seems to differ on how much of a down payment they request for their vehicles.   Sometimes down payments are high, sometimes they are low, and sometimes there is no down payment required at all.  Let’s take a look at these situations to see if we can help explain the various down payment differences.

What is a down payment?

A down payment is simply your initial investment on the loan for your new vehicle.  Banks got themselves in trouble several years ago because they were financing 100% of the loans so now even banks usually require some upfront money before they finance their deals.  Banks typically finance 80-90% of the loan value for new vehicles meaning the consumer now has to come up with 10-20% down.

Credit Score

The next thing about down payments it is important for consumers to know their credit score. Down payments can vary a lot of times simply based on your credit score.  The better your credit the more banks and finance companies are willing to lend because there is less of a risk of you not paying them back.  Sometimes you will still need a down payment even with a great credit score.

Low Down Payments Dealers

As mentioned above one of the best ways to get a low down payment is to have good credit.  There are also some dealers whose business model is to do low down payments.  Lower down payments can be a good thing because it’s less money you have to come up with, but also realize you will be financing more which means higher and longer payments.

High Down Payment Dealers

There are two types of high down payment dealers.  One that deals with more expensive cars and others that deal with lower priced cars. The more expensive cars usually require more down to help balance out keeping your car payments shorter by lowering the amount you finance from the bank.  The lower priced dealers want more money up front to cover their investment in the lower priced car.

No Down Payment Dealers

These are the dealers you have to be the most careful with.  It’s one thing to have a zero down payment because you have great credit but if you have bad credit or no credit and you’re looking at a car for zero down payment it’s completely different.  The bad credit and no credit situation you just want to double check everything.   Is it no down payment because they just want to get you in a car as quickly as possible before you have time to process what you are doing?  Is it no down payment because the vehicle has mechanical issues?  Sometimes it’s no down payment because there are extremely high pick up payments for the first few months to make up for zero down payment.  These dealers aren’t necessarily bad you just want to be the most cautious in this category.

Hopefully this helps you when the time comes to get your new vehicle figure out what a down payment is and why it matters.  Always remember you the consumer have the most power because it’s your decision who you give you’re hard earn money to.  The more money you put down the more options dealers and finance companies will give you because it’s less risk on their part.

Thanks for reading this article,

Philip Nassoiy


Paul West Used Cars

3320 N Main Street

Gainesville, FL