For those who don’t know, a down payment is a significant percentage of the car’s price that is paid at the beginning. For example, if you’re buying a car that has a sale price of $30,000 with a 10% down payment, you’ll have to pay $3000 at the time of sale. The down payment is a very crucial payment, for it reduces the burden from the shoulders of the buyer and also provides a guarantee to the seller that he will surely be paid the rest of the money with time passing by. Lenders will always encourage you to make down payment as a security. There are several reasons to make a down payment, some of which are:
Interest is the first thing that comes to anyone’s mind when it comes to paying in installments. Keep in mind, if you put more money on the table at the time of purchasing, the lesser interest you’ll have to pay. If you want an extension in the installment period, you’ll have to pay more for the same asset. If you ever get short of budget you there are multiple car loans in the market offered by different companies. People who make hefty down payments have to pay a lower interest amount. For more information, visit CarLoans.ca.
Monthly payments get precise
People who pay acute down payments have to pay hefty monthly payment after borrowing a loan for buying a car. However, after paying a significant amount in the beginning, you will be able to save more money every month with fewer monthly installments. For example, if you buy a car that is valued at $30,000 with a 4.5% interest rate, your monthly plan will be inclusive of a payment of $559. However, if you make a down payment of $10,000, you will have to pay only $348 for a five-year plan.
Stress gets reduced
What comes as part and parcel with the purchase of an asset on installments is a lot of stress. A lot of people don’t think about it unless they don’t engage in it. Payment in installments is anyways stressed for everyone despite somebody having their own business or even if they’re working for someone. The payment in installments has to be paid. Otherwise, there is always a risk of the creditor suing the other party. Every year people borrow loans worth billions of dollars to purchase new assets that bring a lot of financial burdens.
You might get special discounts
Car dealers often offer interesting discounts and coupon codes for their frequent customers. Such coupon codes can be used for getting discounts on car maintenance and buying car accessories from the same car dealer. Most dealers have a vast array of services for the car that is available next to the car showroom. So if your car dealer is having a good day with you paying a handsome down payment, he might offer free maintenance for the next two months.
You can offset depreciation
There’s no escape from the fact that an asset starts to deteriorate with time passing by. Experts say that vehicles lose 15% of their value each year. However, new cars depreciate at a faster rate. You will get shocked to know that a new car can lose 25% of its value in the first year. So if you don’t make a hefty down payment, you could be paying more than the amount you’d have to borrow. Therefore, you must pay a significant amount of money at the start.
No one can deny the fact that down payment relieves a lot of stress and provides financial security to the lender as well. So if you’re buying a car for the first time, you should always have a handsome amount of money to conduct the first transaction.