What minimum percentage of a car's price would you recommend for a down payment?

Question

I realize this depends on one's finances, and you'd always want to avoid financing as much as you can, but I'm wondering if anyone thinks there's a good rule of thumb to be financially sensible. "Zero down" offers just seem crazy to me. Do you think a 20 percent down payment is sound? How much should I save up? Thanks!

Answer 1

I've been in finance for over four years now. Here's what your looking for. The first step is to decide how much money you can afford each month. Then decide how long you will have the car or how long the car will last. (Ex. a new car should have a zero balance in five years. Otherwise you will most likely owe more than the car is worth, which is bad.) So if you know you can spend $300 a month on a new car ($300 mo. x 5 yrs) that's $18,000 worth of payments. So if the car costs $24,000 you need to make a down payment of $6,000. The goal is to put down as little as possible. Because you would rather have that money in the bank. It's the amount of the monthly payments that are most important. Oh ya, don't forget include the interest in your calculations! Enjoy your new car!

Answer 2

Even with "zero down", you can pay towards principle at any time. Putting money down just lowers amount financed, thus lowering monthly payments and interest paid. Get the lowest rate you can and borrow as little as you can while maintaining comfortability. Make extra payments towards principle as often as you can. Don't drain your account in order to put money down. Remeber, a good rule of thumb is to have at least one years income in a savings/low risk investment. The best bet is to buy in cash what you can afford and pay that car payment to yourself. After a while you will be able to buy a new car outright. Buying new cars is fun, but not a sound investment.

Answer 3

I would say, pay at the amount of the taxes and the finance charges- so that you don't have to finance it. But the more down payment you put the lower the monthly payment will be. If you are going to buy a car. Don't talk to a regular sales person. I would talk to a Fleet Manager or Internet Manager. These people doesn't need to sell cars out of comission. They can sell the car dirt cheap almost to invoice. So really, the minimum payment you can use to down payment is almost about 10%-15%.

Answer 4

You have to look at your financial situation, and the rates and programs that are available to you. You also have to know yourself, and how much self disipline you have financially!

For example, if you can get a 0% finance rate, and have the self disipline, you can finance as much of the purchase price as you can, and put the money you were going to put down into a bank account that pays 4-6% interest. That way you are making money.

If you are not going to wisely invest the money, or if the finance rate is higher than the return you can get elsewhere, then put as much as you can possibly can down on the vehicle.

Check with your bank or credit union to see what the rates are, and if you can get a lower rate by having more money down!!

Good luck!

Answer 5

If the car is being offered at 0% interest and if you can afford the payments pay it off as quickly as you can comfortably afford. I agree with you 0 down is wacko. Personally I have slammed down as much cash as I could comfortably afford. Paying interest on any loan is $ out the window. Twenty percent is a good number however. I'd then carefully look at the rates per month and get it done ASAP without killing your lifestyle. Good luck to you and tour family.

Answer 6

Look at the price of the same model, two years older. Put down the difference. This should insure that you don't get "upside down" and into a bad situation. Yes, zero down is crazy, but some think I am crazy because I use 100% down. I don't have car payments, though. It sure is nice to have a few extra bucks every month.

Answer 7

I would say at least 10 percent, but the more you put down the better the deal you get, and the lower your payments. So pay as much as you can upfront.

Answer 8

20% really is the minimum, most cars today are close to $20k and $4K down is a start. If you don't have a larger down payment you will need to get into a long term finance (60-72mo) and by the time your done paying it off you will be ready to get rid of it. With 20% down I would suggest a lease.

Answer 9

You would be better off buying real estate, than having to be tied down to payments on something that will lose value. I cannot see buying a new vehicle unless its cash and you have lots of money. Most cars barely make out of warranty before a expensive repair is needed. With today's suspension parts and engine blocks made out of aluminum,you know they will break easy.

Answer 10

I put $8,000 down on my $20,000 truck and $3,500 down on my $28,500 car. I would just look at the payments you can afford. Usually somwhere between $3000 to $4000 is really good.