Dye Autos Denver Area Truck and Automotive Blog

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Ultimate Guide to Making a Down Payment at the Dealership

By Dye Autos / November 1, 2018 / Comments Off on Ultimate Guide to Making a Down Payment at the Dealership

ultimate-guide-to-making-down-payment-at-dealership-1When you’re buying a new or “new to you” vehicle, whether you’re getting your auto loan through an independent lender or through a dealer, you’ll need to decide how much money you want to put down. Making a down payment at the dealership takes some preparation so your purchase runs smoothly.

First, let’s define down payment.

The phrase is actually derived from the old practice of putting money down on the table to show a seller good faith when negotiating a deal. Today, the down payment is simply a way of reducing the amount of risk a lender has to take when helping you make a substantial purchase.

Do I always need a down payment?

A down payment isn’t always required for purchase, but it’s definitely a good idea. Why?

  • It will reduce the amount you’ll need to borrow.
  • It improves your chances of loan approval.
  • You may get better terms with a down payment.
  • It will reduce your monthly payment.

Is my trade-in considered a down payment?

Yes, your trade-in vehicle can serve as your down payment. However, there’s one question to answer that will determine how your trade-in down payment will be handled.

  • Is your trade in loan paid off?
    • If your trade-in loan is paid off, the dealer will appraise your trade-in and give you the price they’re willing to pay for your vehicle (actual cash value or ACV). You can use that amount as a down payment.
    • If your trade-in loan is not paid off, the dealer will obtain the “pay off amount” and compare it with the price they are giving your for your trade-in (ACV).
    • A positive difference (you owe less on your loan than your trade in’s ACV) means you can use the amount for your down payment.
    • A negative difference (sometimes called “negative equity” – you owe more on your loan than your trade-in’s ACV) gets a bit more complicated.
    • Does your trade-in have negative equity?  For example, if your trade-in’s ACV is $3,000 and your loan pay off is $5,000, you have $2,000 in negative equity and will need to make up the difference either in your new loan or by paying additional down payment.

How much do I need to put down?

The generally advisable percentage to put down on your vehicle purchase is much like the recommended down payment on a home—20%, if you can afford it. Used cars may require less—10% or more.

Having a 20% down payment ensures that you’ll receive favorable terms on your financing, lowers the amount you need to finance, and reduces your risk of owing more on your loan than your vehicle is worth later on. The benefits of a higher down payment can include:

  • Favorable financing terms
  • Lower interest rate
  • Higher loan approval rates
  • Lower monthly payment
  • Lower total interest paid
  • Reduced risk of being upside down

What forms of payment do dealerships take as down payment?

When it comes to making a down payment on a car, be prepared with your method of payment. This may include:

  • Cash
  • Personal check
  • Cashier’s check
  • Credit card
  • Debit card
  • Pre-approved loan
  • Personal loan

Pro Tips on Down Payments

  • If you want to use a credit or debit card, ask the dealer if they will accept this form of down payment and if there’s a limit on how much can be charged.
  • Check with your card issuer to see if there is a limit to the amount you may charge in a single transaction. The last thing you want is to have your card only be able to charge $2,000 when the total down payment is $5,000.
  • Keep in mind that getting a personal loan prior to seeking approval for an auto loan will likely impact how much you can borrow. The credit inquiry and loan will show up on your credit report and affect your “Debt to Income” ratio.

Got more questions about making a down payment?

Each vehicle sale is different. At Dye Autos, we’ve sold thousands of cars and pickup trucks. We’ve helped a lot of confused people determine which down payment is right for them. Many of those customers thought they’d never be able to afford a vehicle!

Give us a chance to help you. Call us at (303) 286-1665 or use our handy online financing pre-approval form >>here<<.

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What is a Good Down Payment on a Pickup Truck?

By Dye Autos / July 19, 2018 / Comments Off on What is a Good Down Payment on a Pickup Truck?

good-down-payment-on-a-pickup-truck-denver-1Many consumers believe you can’t finance a used pickup truck or car. The fact is, used car dealers have some of the best financing available. They work with credit unions and banks to get the most attractive terms and pass them onto you. Like all loans, making a down payment is advantageous. But how much should you actually put down on a pickup truck?

A down payment isn’t always required for purchase, but it’s definitely a good idea.

Why?

  • It will reduce the amount you’ll need to borrow.
  • It improves your chances of loan approval.
  • You may get better terms with a down payment.
  • It will reduce your monthly payment.

First, let’s define down payment.

The phrase is actually derived from the old practice of putting money down on the table to show a seller good faith when negotiating a deal. Today, the down payment is simply a way of reducing the amount of risk a lender has to take when helping you make a substantial purchase.

Down payment isn’t always cash.

Your trade-in vehicle can serve as a down payment. If you still owe on that loan, the amount of “equity” you have can serve as your down payment. “Equity” is the difference between your trade-in’s loan payoff amount and the actual cash value of your car.

If you have a trade-in, and if you can swing it, any additional down payment – even a few hundred dollars – has a very positive effect in the long term.

For more pickup financing tips, check out our post: “Answers to Your 6 Biggest Used Car Financing Questions”

To determine the amount your down payment should be on a pickup truck, consider these two important factors.

1. Credit Score.

Before attempting to finance any purchase, you should always know your credit score.

Check your credit report as soon as you start thinking about buying a used car or truck, even if it’s months in advance. If you’ve got less-than-ideal credit, taking this action will help you even more…and save you tons of time and money.

By cleaning up your credit before applying for a loan, you improve your chances of being approved with decent terms. Cleaning up your credit will include paying off past due accounts, disputing credit report errors, and adding positive information to your credit report.

ProTip: You can obtain a FREE credit report.

When you check your credit score, be sure to focus on where you fall in comparison to other consumers, and what areas of your credit are strong — and what might need some work.

FTC (Federal Trade Commission) Website: You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228. You will need to provide your name, address, social security number, and date of birth to verify your identity.

2. Your Monthly budget.

The bigger your down payment the lower your monthly payment will be.

For a used pickup truck loan, you generally want to put down 10% or more of the vehicle’s sale price if you want to reduce your monthly payment. For example, if you want to finance the purchase of a $15,000 pickup, you should plan to put at least $1,500 down. Lenders may require more down payment depending on your creditworthiness.

Generally, for every $1,000 of down payment you apply, you can expect your monthly payment to drop by about $25 to $30, depending on the interest rate.

Depending on your credit score, current interest rates and the type of pickup truck you want to buy, you may not need a large down payment. Some people like to finance as much as possible and keep their cash for other things.

Where do I go to learn more?

Each vehicle sale is different but at Dye Autos, we’ve sold thousands of pickup trucks and we’ve helped a lot of people who thought they’d never be able to afford a vehicle.

Give us a chance to help you. Call us at (303) 286-1665 or use our handy online financing pre-approval form >>here<<.

Read More