How Much Should I Save for a Down Payment on a Car?

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How Much Should I Save for a Down Payment on a Car?

This is a question asked far too often, not to fret, we will help you out. To  understand this better, you have to understand how Financing a Car works. This is something I covered a while ago in our previous blog posts called ‘Financing a Car: 101’. If you’ve not read that, go ahead and read it and head back here.

So, thinking of purchasing a car but not sure how much cash is a ‘good’ Down Payment? A lot of dealers often advertise $0 down payment on vehicles but that is always OAC or On Approved Credit. OAC is the line of credit that the bank approves for you when you are purchasing a car. So a good down payment usually depends on OAC . There are different ways this can pan out. For Example :

Scenario 1: Cost of Vehicle is $15,000 $15,000 is approved toward equity.

In this case, $0 down would be no problem and help you keep your finances liquid and free to move the way you want. But you must also keep in mind that a down payment would lower your monthly payment and reduce your overall total cost of the vehicle (including interest at the end of the loan)

Scenario 2: Cost of Vehicle is $15000, $13500 is approved toward equity.

Banks look at your credit history to determine your approved credit. Sometimes, the bank approve a part of the total agreed cost of the vehicle. In this situation, you will have place a down payment of $1500 – the remainder of the cost. This will let your application to go through and secure the vehicle.

These are the two possible situations that can occur, sometimes you may not have enough cash to place enough down payment to secure the vehicle. In this case, you will have to look at a vehicle with lower cost and finance that instead. Once you finance that vehicle, ensure that you don’t miss any payments and you can return in couple of months when you have a better credit score to gain a higher approved credit to purchase the vehicle you wanted in the first place or something better.

Apply now through our HTTPs Secure Finance Application for a quick and easy approval.