What are the pitfalls of buying a truck without a down payment?

Question

I mean, the money that you COULD be using for a down payment could be used as your monthly payment, 'cause that's normally the amount of money you would set aside for savings anyways. For example, you could save $300 a month and at the end of the year have some so-so amount for your vehicle's down payment while paying $150 dollars a month for the loan, OR you could go to the dealership today and buy the truck of your dreams and drive off the lot with it alot sooner than a year's time and pay the $300/mo that you were GONNA intentionally save up for the down-payment. I'm just curious, is it so bad to not have a down payment? I can't save money to save my life, but I am responsible when it comes to monthly payments of one sort or another.

Answer 1

Just run the numbers. Say you buy a $20k truck with no money down, and the loan is 7% for 5 years. Monthly payment would be $396/month. Over the life of the loan you would pay 23,761 (i.e. $3761 in interest).

Say instead you put $3000 down, and take out a loan on the remaining balance of $17,000. Same loan (7%, 5 years). Interest paid over the life of the loan drops to $3197 (a savings of $764).

Put $5000 down and the interest paid drops to $2821 (almost $1000 saved over 5 years).

You can run the numbers yourself, just google for an "amortization calculator".

Also, as previously mentioned, with no money down you are pretty much guaranteed to be "upside down" on the loan. That is, you owe more on your loan than the truck is worth, due to the truck's depreciation. As soon as you drive a new car off the lot its value drops significantly, even before you've put any miles on it, because it is now considered "used".

The biggest risk in this scenario is if you get into a bad wreck and the car is totalled -- your insurance company will only cover the blue book value of the car, so if it only blue books at $15k, and you owe $17k on the loan, that means you would have to pay another $2k out of pocket to pay off the loan, with nothing to show for it! (Or you could buy something called "gap insurance", but again, this can all be avoided by putting money down).

Answer 2

Aside from the fact that your payment will be more you also run the risk of being upside down in the loan. Meaning you could end up owing more on the truck at the end of a year than the truck is actually worth. The longer you plan on financing the vehicle the greater that risk is. If you can't afford the payments for a four year note, don't get it.

Answer 3

probably a higher monthly bill, just because the dealership would rather sell the car to someone when they know that they are gonna make a profit, for example, a person could walk into a dealership and pay for a car with a check, and get like 10 grand knocked off of the price, just cuz the dealer is willing to make that deal and get their money today

Answer 4

The only thing i can tell you is your payment will be a lot higher and you will pay way more in interest in the long run.Unless you don't care about saving money in the long term.

Answer 5

i have a Friend in the sales business. he says dont put a down payment down unless its over $5000. he says that for every thousand dollars it brings your payment down like 7-10 dollars. if thats worth it then go for it. also when you go in and they say they need 300 down for processing or some crap they dont. that is just for the salesman to go home with something. not all places are the same but he works at a major dealer. thats how they roll.

Answer 6

There are basically 2 varieties of loans that enable a 0 down charge: Rural progression and VA. For VA you would be able to desire to be a veteran and Rural progression should be a delegated rural section. apartment financing is fairly perplexing to prevail in in spite of a down charge these days... different than which you fairly choose 3.5% down.

Answer 7

Interest rate will be higher