Down Payment: How Much Money Is Enough?

How much money is just right for a down payment depends on whether you’re buying or leasing. The Buying Advice team advises making as small a down payment as you can when you lease, and as large a down payment as you can when you buy. Here are the reasons.

Avoid Putting a Lot Down for Leases

For auto leases, make sure your down payment, or “cap cost reduction,” is as little as possible. The reason is simple. You might lose that money. If you get into an accident and the car is totaled, your collision and gap insurance will pay the bill but nobody will give you back your down payment. It’s essentially lost, in many cases. Although putting money down can reduce your monthly payments, we recommend limiting your down payment to $2,000.

Put as Much as You Can Down When Buying

The more money you put down upfront, the less you have to finance over the term of your loan. You’ll reap the rewards of lower monthly payments and perhaps obtain a shorter loan, which means more savings. It’s advisable to put a payment of at least 20% of the cost of the car down.

Also Remember…

If you’re discussing the car payment with a dealer, remember to negotiate the purchase price first, before any other aspects of the deal. The lower the total cost, the higher percentage you can afford to put towards a down payment. Also remember that if your down payment is too low, the dealer will make up for it somewhere else. They may raise your monthly payments, extend the length of your loan, or offer less for your trade-in. Pay attention to the details.

Have you gotten quotes from all of your local dealers yet? Before you negotiate a deal, you should find out what the competition can offer. You might use a second offer to leverage a better deal from the first dealer you speak to. Click here to learn about getting quotes online, without visiting a dealership.


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