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New Car Purchase Down Payments

Although making a down payment on a new vehicle purchase is not required when applying for an auto loan with Premier Auto Financing, leaving a significant down payment can help you in several ways.

Obtain a better interest rate!
Making a down payment exhibits that you are keen on making an investment by means of your new car purchase, therefore allowing you to obtain a more desirable interest rate for your auto loan. ** This will be the case with used car loans as well.

Avoid owing more than your car is worth!
A down payment will allow you to absorb the impact of the instant depreciation that occurs when you buy a new car. How? Because depending on the amount of down payment that is left, you can eliminate becoming 'upside down' on your car loan. When you are 'upside down' on your loan, you owe more on the car than it is worth. Most new cars will depreciate by a few thousand dollars once they leave the lot, and around 25% annually. So in order to eliminate the chance of owing more on your car loan than what your vehicle is worth, you should look to leave a down payment of 30% or more. If you leave anything less, you will wind up being 'upside down' for several years, but not forever.

On the contrary, when you do not leave any down payment on a new auto purchase, you are guaranteed to be instantly upside down on your loan the second you drive out of the dealer's lot, and into the street. You will continue to owe more than the car is worth for the entire life of the loan.

If you can afford a down payment, don't contemplate leaving one!
On average, most consumers only put about 5% of a down payment on new car purchases. This is minimal, not even covering taxes and other fees. A 5% deposit is not considered an investing sum by any lender, and will not help you achieve a lower interest rate.

If you want to reap the benefits of leaving a down payment on your new car purchase, you will need to leave at least 20%. The only benefit of leaving anything less would be a lower monthly payment.

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