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June 2, 2014

How Much Downpayment Will I Have to Pay?

If you are in the market for a new car, you may be wondering what your down payments will be. There are several ways that you can determine how much you will pay for your down payment. Factors like your credit score, income and budget will all be determining factors in how much you will pay for your car’s down payment.

Credit

Your credit score will be the largest factor in how much your down payment will be. If you have perfect credit, you can often get financing for no money down. Since most people don’t have a perfect credit score, a down payment is necessary. This is the amount of equity you have in the car. This also tells the lender that you have a stake in the car and you are willing to make the payments each month. The higher your score, the lower down payment you can expect to make.

As a general rule, lenders like to see a buyer put down 20% of the purchase price of the car as a down payment. For a $10,000 car, for example, the down payment would be $2,000. A $5,000 car would require a $1,000 down payment. While this is a general guideline, there are always variations. Your lender might allow you to buy the car with a 10% down payment. There are often special deals for borrowers who are looking to restore their credit that allow buyers to put down less money.

Income

Your lender will look at your income to determine how much of a down payment you will have to make. If your income is low and your credit is poor, be prepared to make a large down payment. Some lenders will require the entire 20% down for buyers with low income and poor credit. If your credit is average and you have a moderate amount of consistent income, you may be able to pay less for your down payment.

New vs. Used

The amount of money you will put down on your car will depend largely on whether the car is new or used. Buyers can often put down less money on a used car than on a new one. Putting down less than 20% on a new car puts you at risk of being “upside down” in a car loan. This means that you owe more than the car is worth. Putting down the maximum amount you can afford will help you to avoid this phenomenon.

When it comes to buying a car, it helps to know exactly what to expect. Examine your finances and figure out how much you can afford to spend for your new car. Determine the purchase price of the car and calculate the down payment from there. In many cases, it is going to be no less than 20%, but you can consult with your dealer to find out if he can work with your budget.

Find the right car for your budget and drive away today.

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