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The Best Amount For A Car Down Payment In Milton

The Best Amount For A Car Down Payment In Milton

Your car loan is probably your second biggest outgoing after your mortgage or rent. Lowering that amount can have a huge impact on your financial wellbeing and lowering the amount you have to pay will benefit you in many ways.

 

One way to do that is the down payment. But is there a best amount for a car down payment? Is there a magic number that strikes the balance between cost and practicality?

 

The short answer is no. There is no magic number for a down payment.

 

Car loan down payments

 

The usual calculation looks something like this – the maximum down payment you can save or make without putting yourself into difficulty.

 

If you’re saving for a down payment, that essentially means how long you can hold off buying a new car while you save the down payment. Otherwise, the more the better.

 

A down payment benefits a car loan in three ways:

 

  • Lowers the car loan amount – If you have a larger down payment, you can borrow less. This has obvious benefits both monthly and over the loan term.
  • Increases affordability – A lower car loan amount will also make it more affordable. Both in terms of paying it back and in terms of your debt to income ratio. If you have debt already, this could make all the difference.
  • Higher chance of application acceptance – A higher down payment will increase your chances of being accepted for the loan. That’s because it lowers any potential losses the lender would make if you defaulted, which lowers the risk.

 

Lenders love down payments

 

While lenders are primarily interested in making a return on loans, they also love it when customers make down payments.

 

A down payment lowers the risk of the loan, which benefits everyone. As you would lose the down payment if you defaulted on the loan when the lender repossessed the car, the cost of that default is lowered. This means lower losses should the worst happen.

 

What’s a good down payment on a car?

 

A good down payment on a car is the most you can afford. You can see above how a down payment benefits a car loan. The more you put down, the more you benefit.

 

You have to weigh up the benefits of having to wait to save for the down payment versus going for a car loan with what you have. If you have it in cash, this isn’t an issue.

 

If you’re saving weekly or monthly, this waiting period will have a huge impact. If you’re coping okay and your current car is reliable, you’re good to save. If your current car is unreliable or expensive to run, you may be better off using what you have and having a slightly higher loan.

 

It’s difficult to advise you in a blog post, so we won’t. If you’re looking for a new car and would like to explore your options, we can help.

 

We will use all our skill and experience to deliver the lowest possible car loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

 

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Categories: Auto Loan

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