What is More Important in Buying a Car, a Big Down Payment or a Low Interest Rate?
Buying and determining how to pay for a new car or used car can be an involved process. If you have the option to make a big down payment or take advantage of a low interest rate, which option should you select? Or should you take both options?
You Don’t Need To Put a Large Sum of Money Down
First, it is important to remember that you don’t need to have a lot of money for a down payment in order to buy the car that you want. This is a common, but very persistent, misconception. All too often people believe for a variety of reasons that they simply must have a sizable down payment in order to buy a car.
Where does this misconception come from? One possible answer is that a sizable down payment is often required when buying a home.
However, it actually isn’t necessary to make a down payment of any kind when buying a car. Many car dealerships have a variety of options and access to financing plans. In fact, even those with credit issues can have luck when it comes to auto financing plans. In many cases, they can even buy a car with no money down.
Whether you want to make a down payment or not is, of course, up to you. On the other hand, qualifying for a low interest rate is fantastic. If you have a very good credit score, this is one of the side benefits you will enjoy.
Other factors that go into assessing your interest rates include:
-Where is the money coming from?
Your rate will be different from a bank or credit union than it would be from a private lender.
-What kind of car are you buying?
Interest rates vary from new cars to used cars.
-What is the length of your loan?
In general, a longer loan will come with a higher interest rate.
Advice for Those with Credit Issues
What if your credit score isn’t very good, then what? As it turns out, owning a car and consistently making payments on that car is one of the best ways to build your credit score.
So even if you don’t have the best credit score in town, you can still use the car buying process to help you not just get behind the wheel of a new car or used car, but also to help you rebuild your credit score. Through this means, someday you will qualify for that very attractive low interest rate. This, of course, will help you save money on every monthly payment.
Keep in mind that even if you don’t qualify for a low interest rate or don’t have money for a down payment, you can still get the car you want. The key is to talk to your car dealership and explore the variety of options that are available.