Buying a car is always considered a huge deal simply because it is one of the most significant purchases a person can make. For this reason, one needs to be conversant with everything that has to do with purchasing a vehicle before even stepping into a dealership. One of the things a person is supposed to know is an auto loan down payment. As much as it is a popular topic for many, some people are still not familiar with the idea of making such payments. Now that is what we are going to talk about.
Where can I get a car loan?
Before we get to how much one should save, you need to know exactly where you can get a loan in the first place.
Below is a list of various institutions where you can get car finance services/deals;
- Car dealerships- if you have a good credit score, you can get favorable car loan rates right there at the dealership.
- Community banks- if you have a low credit score, a community bank can quickly help you get a loan.
- You can search on the internet for institutions who give car loans- you can look up the keywords “loans near me” and go through the list of results to see which institutions offer the best deals.
If you reside in Tyler, Texas, you can use more specific keywords like “Loans Tyler Tx” or even “Tyler Auto Finance” to get better and refined suggestions.
How much should you save?
Now that you know where you can get a loan, we can get to the main agenda. How much should one save for an auto loan down payment?
The best answer to this question is, it depends. Basically, the figures differ due to one reason or another. However, one factor plays a vital role in determining the amount one should save, and that is the “state” of the car. In essence, is the car new or used?
Experts recommend putting down 10% of the vehicle’s total price when purchasing a used car. On the other hand, when you want to buy a new vehicle, it is recommended that you put down at least 20% of the total price. The difference in figures here is mainly because new cars lose value quickly in the first few years.
Benefits of making a car loan down payment
There are numerous benefits that come with making a down payment. Some of them include;
- It saves you money- if you put down a substantial amount of money as your down payment, the loan you will take will be small. If you get a smaller loan, the interest to be paid will also be little. This will, in turn, save you a lot of money in the long run.
- It helps smoothen the approval process – with a down payment; it is much easier for your loan to be approved by the lender.
- Can help in offsetting depreciation – cars depreciate with time. Paying a down payment can help narrow the gap between what you owe on your loan and what the car is worth.
How to save for an Auto loan down payment
Since you are now conversant with everything to do with an auto loan down payment, here comes a crucial question, how do you save for the loan?
Here are a few tips;
- Use an Auto Loan Calculator- before visiting the car dealership, look for a proper auto loan calculator. Using the tool, get an estimate of the down payment that you might pay if you do buy the car. With this, you will be able to make an elaborate plan on how to save money until you reach your goal.
- Automate your savings deposit account – the good thing about this feature is that you don’t even have to remember to deposit money into your account. This is because it is done automatically before you even get your cheque.
- Pay all your credit card debts – in as much as it sounds counterintuitive, paying credit card debts is helpful as it will increase your credit score. You won’t have to pay your credit cards monthly plus the hefty interest fees. Hence it will help you save up.
Down payments are excellent tools to help you smoothen the loan approval processes. They also play a significant role in reducing your monthly car payments and offsetting depreciation of the car. That is why it is advisable for anyone planning to purchase a vehicle to save up some money beforehand. The money that he/she will save will come in handy when making a down payment. Of course, saving is not a walk in the park, but you will definitely have an easy time if you follow the tips highlighted in the article.