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Car Down Payment, Financing Misconceptions Cleared and Explained

When I say financing, I’m talking about both lease and purchases for more in-depth information. One of the biggest questions we get is do I need a car down payment? The answer is, it depends on your personal credit information on the car you’re purchasing and the circumstance of the approval of the banks.

One of the most common misconceptions people have about down payment is when the salesperson asks the customer how much down payment, they think they’re asking them how much can you put into the salesperson’s bank account. This is the furthest thing from the truth, and let me elaborate upon it.

Financing is a good option if you have zero down payment

Not a lot of us have the full amount that the dealership is asking for at a time. So the next best option for us is to get financing from the banks and the lenders in exchange for paying interest, so you could get approved with zero money down. You can also get low down payment cars if you want, but then the monthly dues will be higher.

Ok, you can get a coupe with runes on, depending on your credit, but here’s the reason why you should put some form of down payment.

Car Down Payment 2021

Number one is to debate that you’re a serious buyer and you’re serious about purchasing this car and you’re on you’re not planning to keep on the lower. In other words, you have to sit down and know where your interest rate on your loan will likely be.

Secondly, the more you put down is the less you borrow to lower the monthly payment you owe people. So it makes it easier for you on a month-to-month basis to make your payments instead of it being so high and you have to skip which in return ruins your credit scores.

Explaining why car down payment is a good thing

Let’s say we have to buy a $25,000 car. If you have zero down payment, you’re going to have to get financed for twenty-five thousand dollars from the bank. Now let’s say you decide to put some form of money down and you decide to put $2500 down. Okay, when you put that amount down, it doesn’t go into the broker’s pocket. No, the brokers don’t make a penny out of your down payment, but here’s what happens. Let’s say you do decide to put $500, so the amount that you have to get financed reduces from $2,500 to $2025, and this is the scenario that happens.

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Often you have the down payment but you also do have trading and we appraise your vehicle at 75%. So the total down payment right now that you have on there is $10,000. But in this case, you have $10,000 down so you only need to get financed for fifteen thousand dollars, and just by seeing this, obviously, your monthly payment is going to be a lot less than $2500 and your interest rate will be a lot lower and you will complete the loan a lot quicker.

Keep this in mind, though, the more money you put down the lower your payments are going to be the less interest you’re going to pay. The chances are you’re going to get a better interest rate.

So what can I use to make that down payment?

Well, there’s a lot of different ways you can do it. It can be in the form of a trade, it can be check, it can be cash, it can even be PayPal or debit card.

What type of cars can be financed?

Any new car can be financed. Use cars most banks like to see something no more than eight years old and with less than 80 thousand miles on it. However, if they’re a little bit older than that or have a few more miles than that the dealerships can usually secure some type of short-term financing.

Another question- Is auto loan financing the same thing as credit cards. No, Credit cards are what we call unsecured debt you’re borrowing money against. You have pledged collateral the car against the loan. Another big difference is that credit cards are compound interest. Compound interest means you’re paying finance charges on top of the finance charges you’ve already accrued. Auto loans are straight-line simple interest, which means the only finance charges you pay are on the principal balance of your loan.

Another question- I don’t have any established credit, but I want to finance a car. Credit means you have a file with a credit company that says you have borrowed money and repaid it successfully before. If you do not have one of those options open to you or a significant amount of money down, then you need to find a qualified cosigner.

Another great question we get is- I want to get the car and want it at the best interest rate I can, but I don’t want to have my credit pulled five or six times. Ans- Federal law says: if it’s a related transaction within 14 days, it only counts as one pull against your credit. Even if your credits are pulled five times, it’s no different for the car dealerships to pull it just once.

How long does the car finance process take?

It depends on the deal and your credit. We always recommend that you go ahead and send your credit information beforehand. That way, the finance professional has already figured out the best Bank and the best rate for you before you even set foot in the dealership.

Great you’ve been approved for your auto loan and you’ve taken home your car. Now it’s time for the question of the monthly payment we get all the time is, how do I make my monthly payments? They can be mailed to the financial institution. They can be directly debited out of your account or you can set up for online payment with almost every finance institution. That’s used for auto loans.

Today I want to get a new vehicle, but I’m still making payments on my current vehicle. that is not present a problem at all. Simply bring your vehicle in will get a value for it, we’ll find out what you owe on it and then we’ll move forward with your new loan.

Do I own the car completely after the financing term is over?

Another question we get is- what happens at the end of my financing term? Well, congratulations! You own A car! You have no more payments to make depending on what institution you have for your loan you’ll either get a title in the mail or an electronic title, meaning that you own it outright free and clear.


That’s pretty much the gist of what it means to make a down payment, and it’s there to help you guys and not the salesperson. Okay, to recap number one- the more down you put the less interest. You will likely pay the more down you post, the lower, the monthly payment will be, and you just under the vehicle lot quicker. I hope that this article helped clear some confusion about the car down payment you may have had with low down payment cars.