How Much Should You Put Down on a Car?

Deciding on a budget for your new car means figuring out both a monthly payment you can afford and a reasonable amount for a down payment. The right size down payment can vary based on your budget, whether you’re buying a new or used car and the interest rates you have available. Rairdon Volkswagen can go over these factors with you and help you answer the question of how much you should put down on a car.

Why You Should Put Money Down on a Car

While no-money-down offers are often available, there are a few reasons why putting some money down on your new car is usually a good idea.

Better Financing Options

A larger down payment means taking out a smaller loan, which means you’ll ultimately pay less interest. Your monthly payments will also be lower the more you put down. Your down payment might also help you qualify for a better interest rate, which means a lower overall cost. Some lenders will require a down payment to approve you for a car loan, so planning for a down payment gives you more flexibility regarding lending options. In general, down payment requirements are lower for used cars than for new cars.

Avoid Going Underwater

Since a down payment lets you start with some equity in the car, you’re less likely to get into a position where you’re underwater on your loan, meaning you owe more than the car is worth. If you’re in an accident that leads to serious damage to your car, or you need to sell your car before the loan is paid off, this can become a major problem.

Financing Options When Buying a Car

When financing a new vehicle, you’ll normally be presented with two options. Financing from a bank and financing directly from the dealership. Bank loans might come with lower interest rates, but they can also take longer to process and have stricter credit score requirements.

Financing through a dealership, however, is more convenient, and it may be easier to qualify for than bank financing. Dealers may also offer rebates and other special deals.

If you’re trading in your old car, you can also use the trade-in value as your down payment. This lets you benefit from making a down payment without tapping into your savings.

Financing a New VW in Everett, WA

Regardless of the amount you plan to put down on your new VW, Rairdon Volkswagen of Everett will help you find the right financing plan for you. We want to make buying your dream VW a reality. Our online pre-approval process will help you get an idea of the interest rates and loan details you can expect.

There are a few factors to consider when deciding how much to put down on your new VW. First, consider how much savings you have available. While making a larger down payment can be helpful, it’s not worth emptying your emergency fund to make it happen. Then, look at the interest rates you expect to qualify for.

The higher the interest rate, the more useful it will be to take out the smallest loan possible by putting additional money down. Finally, consider how your car payment will fit your monthly budget. Depending on your financial situation, paying more upfront and less each month, or vice versa could make sense.

Browse Our Inventory and Test a New Volkswagen in Everett Today

How much should you put down on a car? The answer isn’t always straightforward, but at Rairdon Volkswagen we can help guide you in the right direction. Stop by today to browse our inventory in person and find the best car for you.

Image Source: J.J. Gouin /Shutterstock