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You hear the added costs at the end of car dealer commercials.
They typically include taxes, title and vehicle registration.
But theres another expense associated with buying a car, and it can vary dramatically the down payment.
So, how much down payment for a car should you plan for?
The answer depends on whether youre buying new or used, your credit and your financial goals.
How Much Down Payment for a Car Do You Need?
While it might take time to save for such a hefty down payment, it can be worth it.
Several factors drive the lenders decision to accept a smaller down payment.
This figure can vary, though, based on the vehicle.
A used car is typically cheaper and has already experienced depreciation up to 60% by year five.
Loan Terms and Lender Requirements
When you apply for a car loan, lenders look at the loan-to-value ratio.
Borrowers with excellent credit and high income may qualify for coveted zero-down, zero-interest financing.
Zero-down financing deals may be harder to find in a tight lending environment.
But buyers with strong credit and high income can sometimes find them for new cars.
You might pay a higher interest rate.
Your monthly payments will also be higher unless you canextend the loans term.
To protect yourself, consider gap insurance, which can cover the difference if the car is totaled.
Final Thoughts How Much Should You Put Down?
But if putting that much down would deplete your emergency savings, you might consider other options.
Keep in mind that long-term costs could be higher if you put less money down.
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