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Should I Make a Down Payment On A Car In Vineland?

Should I Make a Down Payment On A Car In Vineland?

We always recommend making a down payment when buying a new car. We think it’s a sensible option in the vast majority of cases and for very good reason. Actually, our Vineland car loan team came up with 5 very good reasons.


1.   Lower loan amount


The first, most obvious reason is to lower the loan amount. This can reduce monthly payments, lower the interest rate and mean paying less over the loan term. It can also make the difference between being accepted and not.


A lower loan amount could also be flipped on its head. Get the same loan as you were originally planning to get but get a better car or a higher spec trim than the one you were planning.


2.   Pay less interest


The lower the loan amount, the less interest you’ll pay. The lower the loan to value amount, the lower the interest rate you’ll be charged.


Loan to value, LTV, is the calculation of how much of the asset cost is covered by the loan. For example, you buy a $40,000 car with a $20,000 down payment. This gives you an LTV of 50% because the loan is 50% of the value of the car.


The lower the LTV, the lower the lender’s exposure during the loan. They repay this (usually), with a lower interest rate.


3.   Easier loan approval


All other things being equal, a larger down payment will usually increase the chances of your being accepted for the loan.


Part of the loan acceptance criteria is risk. The more of your own money you put down, the lower the risk to the lender. If you default, they stand a higher chance of recouping their money when they repossess, so their risk is less.


The lower the risk, the higher your chances of acceptance.


4.   Lower monthly payments


The lower the loan amount, the lower the monthly payment. That can help you afford the loan alongside your other obligations and also lower your debt to income ratio, which can also increase the chances of your being accepted for the car loan in Vineland.


The same as the loan amount, you can flip this so you pay the same amount as you would each month but buy a better car. It all depends on your personal situation.


5.   Avoid negative equity


Putting more money down means you can avoid going upside down on your loan. Negative equity has no bearing on the loan or the repayments but some people just don’t like the idea of it.


The more you put down, the more value is kept in the car. As the value depreciates, you’re insulated from much of that by the amount you put down. It’s a minor benefit but can be more important to some people than others.


We are always of the opinion that the more you can put down as a deposit, the better. Now you know of five reasons why it’s such a good idea.


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