$0 Down Car Financing: Everything You Need to Know

$0 Down Car Financing: Everything You Need to Know

Posted on June 25, 2022

We always recommend using a down payment alongside an auto loan for a new car. It reduces the amount you have to borrow and increases your chances of being accepted. You don’t have to use a down payment though and no money down car loans are an option.

Our St. Catharines auto loans team outlines everything you need to know about no money down auto loans.

Are no deposit auto loans real?

Yes, no deposit auto loans are real. We often arrange no money down auto loans in St. Catharines for our customers.

We wouldn’t recommend them for everyone but if you’re genuinely not in a position to save for a down payment or need the car in a hurry, they are a viable option.

You do have to shop around though as not all deals are created equally.

Are no money down auto loans a good idea?

No money down loans are only really a good idea if you don’t have the time to save for a down payment. They will be more expensive than a standard loan and your application will be scrutinized a lot more thoroughly than for a standard loan.

You’ll also pay a higher rate on that loan. The lender is taking a considerable risk with the loan as you have no money in the game. They will want to offset that risk with a higher rate.

Down payments can also offset depreciation, which is more important for new cars but can impact used cars too. New cars have a burst of depreciation as soon as you drive them away which evens out over time.

This depreciation is usually offset by your down payment so you won’t necessarily go upside down. You will go upside down if you don’t have a down payment.

This isn’t necessarily a bad thing. Negative equity is only an issue if you’re planning to only keep the car for a year or two or are planning on settling the loan early. Otherwise, it has zero impact on the loan.

Are there alternatives to no money down car loans?

There are alternatives you should consider before you take out a no money down car loan.

Save for that down payment – Unless you need the car immediately, saving even 10% for a deposit could get you a much lower rate on your St. Catharines auto loan.

Use a trade in – Trading in your current car as part of the deal can offset the no deposit and take its place.

Buy a used car – Buying used means most of the depreciation has already happened. The loan amount should also be lower, which will work in your favour.

Borrow cash for a down payment – While not the ideal option, borrowing cash from someone to use as a down payment can also work.

No money down auto loans in are possible and they do allow you to get a car in a hurry but they aren’t for everyone. Think carefully about your options before signing up and talk to one of our team before you sign.

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