How Much Is A Down Payment On A Car Loan?
Do you know what do you need to finance a car in Canada? One of the crucial things is a good amount of down payment. Because when you buy a new vehicle, you are doing one of the biggest investments of your life. Purchasing a car is probably the second biggest investment after a home for people in Canada.
When it comes to applying for an auto loan, a down payment is the most important thing that one needs to figure out. Understanding the role of a down payment in getting you the loan you desire is the first step. Here is your comprehensive guide on vehicle down payment.
What Is A Car Loan Down Payment?
The upfront amount that is paid while purchasing a car is known as a down payment. This money is paid by the customer using his or her savings. Lenders usually expect an applicant to pay a car loan down payment.
With a 20 percent down payment, you can prove to the lender that you are financially capable of affording auto finance payments and thus maximize your chances of getting better instead of an average car loan interest rate in Canada.
For Canadians with bad credit and who want bad credit car loans in Canada, then 20 percent down payment can be mandatory to qualify for a car loan.
How Much Down Payment For a Car Is Ideal?
For most cases, a down payment on a car may range between 10% and 20% of the car price. If you can afford the 20 percent down payment or close to this figure, you could end up increasing your approval chances and also securing an auto finance loan with a more favourable rate of interest.
As per your financial situation, if you find it difficult to arrange for a 20% down payment amount, you must try paying an amount that is close to 20%. Notably, the actual amount needed for a down payment differs from lender to lender.
Although 20 percent is the ideal figure for a car loan down payment, still many people pay a lesser amount because the average price of cars has increased considerably. Due to the large increase in the cost of cars, a 20 percent down payment is a considerable amount.
Benefits Of Making a 20% Car Down Payment
- You can earn the lender’s trust and secure better conditions on your car loan, like lower interest rates, etc.
- Paying a higher upfront amount means repaying a smaller percentage of the loan, which reduces your burden.
- A 20 percent down payment will help you get through the approval process, especially when you already have a poor credit score.
- You could avoid an upside-down car situation.
- Your car’s equity will increase and you will enjoy more ownership.
- Your payments every month will be less and you will pay less in total interest.
Thus, making a substantial amount of down payment is a key indicator of your dedication and commitment towards the whole car finance process. It shows you are financially able to pay back the loan on time.
Seek guidance to explore car finance options available for your circumstances online with us or you can also find out the average car loan interest rate in Canada, so you can choose the better option.
Jack FortinAuto Finance Expert
Jack Fortin is one the leading car loan and auto finance experts in British Columbia, Canada. He loves to write and share car loan news and updates.