Published on February 21st, 2019 | by Jones0
How much should your car downpayment be?
When you are car shopping, you need to understand the financial implications. Whether you are shopping from used car dealerships or a car franchise, you can take steps to lower your monthly payments. This is especially helpful if you are a first-time car-buyer and have a tight budget. One effective way to do this is to offer your bank a down payment on the car of your dreams.
You can speak to the second-hand car dealers about what options you have for a down payment. You might find that some cars for sale are affordable when you offer a down payment, allowing you to find the perfect one to suit your needs. If you are not sure about how much you should offer for this option, you can read below for some top tips on how much your car downpayment should be.
Start with your credit report
One of the best ways to find out how much you can afford to offer as a down payment is to go online and ask for your credit report. This will show you what your rating is and whether or not you can afford the loan you are applying for, and if you have the funds to think about providing a down payment to your lender.
If your credit rating is under 600 points, you might find it highly difficult for your loan to be approved. You will need to work on improving this score by repaying your credit card regularly or discussing any discrepancies you might notice with the correct bureaus. Once you know and understand your rating, you will be able to calculate how much you can offer as a down payment.
Think about the car type
The second step in ascertaining how much you can afford to offer as a down payment is to think about the car you want to buy. This will tell you what your budget needs to be and will help you to figure out the amount of money you need for a down payment.
Not only should you look at whether you will be buying a new model or a used one, but you should also think about the make, model, and year of the car. A new BMW with all the bells and whistles might require you to put down a larger payment, which could be highly costly for a small budget. But, if you decide on a pre-owned Ford Focus, then you might find that the payment you need to offer is lower and more affordable.
Can you afford it?
If you have decided on a car and looked at your credit, the next step will be looking at your affordability and whether or not you can afford a down payment. It is advisable to look into offering a down payment of 20 percent of the loan cost, as this will help to lower your monthly repayments and is an amount that many lenders accept.
The age and model of the car could have some bearing on how much you need to pay. For example, a five-year-old car should only have a down payment of 10 percent so that you are still paying off the loan with some amount of equity. You can use an online calculator or draw up a budget looking at your monthly expenses and costs to determine how much you can save to build up towards the amount.
Time for a trade-in?
If you already own a car, you can trade it in and use this money as part of or as the total of your down payment. It might be a significant amount, which will help to lower your monthly instalments and allow you to repay your loan quickly and without any hassle. Even a few thousand Rands can help towards a down payment.
You will need to be sure that you have repaid your current loan in full before trading it in so that this amount is not used to recoup the loan amount that you still owe. Do some research into when the best time is to trade your vehicle in so that you make the most of the trade-in value. You can speak to your lender or you could ask the dealership if there are any times of the year which are ideal for a vehicle trade-in.
Think smart for your vehicle future
A down payment can be a significant financial aid if you are car shopping. This is because it can help you to lower your monthly repayments as well as allow you to improve your credit rating as it will show financial responsibility.
In order to figure out if a down payment is possible, start by finding out your credit report and looking at the type of car you want. Then move on to calculating your affordability and looking at a trade-in. Soon enough you will be sitting behind the wheel of your dream car.