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No Money Down Car Loans - Are they a Good Idea?

No Money Down Car Loans - Are they a Good Idea?

If you’re not in a position to save up for a down payment or would rather leave it in savings for emergencies, what are your options? Are no money down car loans worth trying?

 

Our Caledonia auto loans team outlines what no money down auto loans are and whether they make financial sense or not.

 

No money down car loans in Caledonia

 

A no money down auto loan, as its name implies, is a loan without a down payment. These are less common than using a down payment but are one of many options you have when considering buying a car.

 

There are a few things you should know before signing up for a no money down auto loan though.

 

Credit score

 

You’ll need a good credit score to qualify for a no money down auto loan. The lender is taking a financial risk by paying for 100% of the car and they will want to know you’re a low risk.

 

The down payment is insurance for the lender. It insulates them from some of the loss if you default on the loan.

 

Asking them to lend without that insurance will take some doing, and usually a credit score of 700 or better.

 

That isn’t always true though, so it’s always worth checking.

 

If you cannot save, can you afford the loan?

 

Saving up for a down payment usually requires two things, disposable income and time. If you’re short of time, a no money down auto loan may be exactly what you need.

 

If it’s disposable income you’re short of, can you really afford the loan? Are you servicing a loan right now? Will the new payments be close to the current ones?

 

Higher interest rates

 

No money down auto loans will typically attract higher interest rates than standard loans because of the extra risk the lender is taking. Depending on the amount of the loan and the loan term, that could mean paying hundreds or thousands of dollars extra.

 

If you need a car right now and don’t have a down payment, that’s just something you’ll have to manage. If you have time to save, it could make better sense to wait.

 

Negative equity

 

Another thing a down payment does is minimize negative equity. When you buy a new car, it depreciates as a quick burst and then slows down. This is usually offset by your down payment.

 

Not having a down payment means you’ll be upside down for a time while paying the loan. If you’re planning on keeping the loan for a while, that’s nothing to worry about. If you don’t like the idea of negative equity, it’s something else to consider.

 

No money down auto loans

 

This all may seem negative, but it isn’t really. We just want you to know exactly what you’re getting into with a no money down auto loan.

 

They are a viable way to finance a new car and we offer them alongside other Caledonia auto loans. But, we think an informed buyer is a happier buyer, which is why we don’t hide the truth.

 

We will use all our skill and experience to deliver the lowest possible Caledonia auto 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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