Making a Down Payment
Even though you may not always need a down payment, it is a good idea to make one in order to lessen the amount of money you borrow, and to get a better interest rate.
When you go to take out a car loan, often the lender will ask for a down payment. This is a portion of the car’s purchase price that you pay up front. Usually, if you can make a reasonably substantial down payment at the time you make a purchase, you will pay a lot less over the long run, as your loan will be smaller and many times you can get a slight reduction in your interest. Even though it is not always necessary to make a down payment, it is a good idea to have some money to put down up front.
Saving for a down payment
A good idea for getting the money for a down payment is to save up for it. If you have the time before you need to buy your car, setting aside some money every week for three or four months can be a good way to amass a down payment for your car loan. You do not need a huge amount; many people find that a 10 percent down payment is sufficiently large. Figure out how much you think your car will cost, and then figure 10 percent for the down payment. If plan on spending about $12,000 for a car, then you would aim to save $1,200. If you gave yourself two months (eight weeks) you need to save $150 per week. If you could wait 12 weeks (three months), would only need $100 per week.
What if you don’t have the time or money?
Not everyone has the time or the money to save up for a large down payment. However, you should save up what you can in order to more effectively reduce the total amount of money that you borrow. However, if you just cannot make a down payment, you can still usually get financing for your car loan. Most dealers offer special financing that does not always require a down payment, or at least reduced down payments. So, even if you don’t manage to save up for a down payment for your car loan, you can usually still get one.