Nobody likes the term “down payment”. Although it may seem costly, a down payment (or an administration fee in the case of a rent-to-own option) can have many benefits. Here are some reasons why you should make a down payment.
Your Interest Lowers With Down Payments
Looking at car finance options from a dealership? Just like a bank loan, your down payment serves as a deposit. Loans can be expensive to pay off, but if you pay a down payment, you can receive lower loan interest rates. Calculate your current interest rate and the interest rate you will receive after your down payment.
If your loan balance is still high and you are still paying a lot more than you can afford, you may want to consider a used car or other financing options (such as rent-to-own options).
The Larger The Down Payment, The Less Your Monthly Payment
Usually, when you finance a car from a dealership, you will have to pay monthly instalments. It is difficult to afford monthly payments if your monthly budget is tight. Larger down payments will knock off the purchase price of your vehicle, which means you’ll receive a lower monthly payment.
Although this may help you to make monthly payments, remember, it also means you’re going to need a lot of actual cash for the car upfront before you can even start the payment term.
Larger Down Payments Can Shorten Your Loan Term
The best way to get a shorter loan term is to make a large down payment. Be careful when signing financing agreements. A shorter loan payment term doesn’t necessarily mean you’ll be paying less. Make sure to calculate how much you will pay over time with interest rates.
Depending on your financial situation, taking out a down payment with vehicle financing may be difficult to do. Even with a short loan term or low-interest rates, you will still have to budget for the ongoing maintenance costs that your car will need.
Get zero interest rates without a large down payment with Earn-a-Car. With our rent-to-own options, you’ll receive an affordable monthly payment when you pay a low administration fee (our version of a down payment, but it’s much lower!). Our payment terms are fixed, and if your financial situation changes, you can always trade your car in for a more cost-efficient model.
Forget a large down payment on your car and contact us today to find out about our affordable rent-to-own options!