Most car shoppers will lean on bank or dealership financing to purchase their new or used vehicle. While the Fox Toyota finance team aims to make the process clear and easy, it can still be pretty confusing, especially when trying to negotiate down payments, trade-ins, and interest rates to get the best pricing possible. So, just how much should car shoppers be putting down before driving off the lot? We discuss down payment strategy more in depth below.
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How large of a down payment do I need for a new or used vehicle purchase?
Some loan providers may have set standards that need to be met to qualify for a vehicle loan, though not all do. In that case, a minimum down payment must be met before financing will be approved. When there is no minimum, it’s up to drivers to decide how much to put down. The obvious downside to a larger down payment is more cash needed up front. But, drivers who choose to save up a healthy down payment will reap the rewards in a number of ways.
In most cases, the larger your down payment is, the lower the interest rate the bank will give you. Lower interest rates will keep your monthly down payment smaller and will help you save over the life of the loan.
A larger down payment will also lower the amount of total financing you need making your monthly payments a little more affordable. In lieu of a smaller monthly payment, drivers may also have the option of keeping their monthly payment a little higher in favor of a shorter loan term for a quicker payoff.
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As a general rule of thumb, drivers who are able to should plan to put about 10 – 20% down on their new or used car purchase. Keep in mind that not all of that money has to be cash. Trading in your old vehicle at the dealership or purchasing when the dealership is offering a cash-back incentive are also great ways to add more bulk to your down payment.