What is considered a GOOD down payment?

[whaddupmia07]

Hello Everyone!

I am looking to buy a new car within the next few months. The price of the auto loan will be between 23-26K, I think. I am completely new to buying a new vehicle so I was wondering what a good down payment on a 26K car is. I am planning on selling my current car for around 3K and using another 1K from personal finances for the down payment. So total would be 4K down. My current score (according to Credit Karma, I haven't pulled Fico yet) is 721 and annual income is 45K. If anyone could answer this for me that would be appreciated. Thanks!!

[Anonymous]

Anything is a good down payment. The purposes of a down-payment is to help keep you from being upside down on a loan and keep your monthly payments lower. Supposedly a good rule of thumb is 20% but in actuality that means nothing. Some lenders may require a certain down payment to keep the loan to value ratio under control. My new FRS. I just purchased I could have put 0 down and finance about 22000 instead I put down around 2000 and financed 20000 to keep my monthly payment at 330. Different lenders have different req. Get an approval before you go to any dealer. The approval amount should be fine as I make the same and was approved for 33k. I used dcu and I recommend you looking into them. Find your fico scores, if your equifax Fico 5 is above 675 I very very very much so recommend dcu.

[Anonymous]

I wouldn't put any down payment when buying a car if u can get loan without down payment.. Instead get the gap offered by ur insurance company which is cheap and u don't need to worry about car being upside down. Buying a new car u will always lose money on car. So why out your hard earned money for down payment. If you can finance it at 0-2.9% depending on which brand and type of car it's best to put nothing down and buy gap through your insurance company. How gap work is let's say u owe 35000 on ur car and ur car is now only worth 29000 u get into an accident and car is totaled ur in the hole for 6000 cause ur insurance only pay 29000 for what car is worth but u owe 35000 now with gap gap will pay rest... So why put a down payment to cover the negative in a car loan?? If u out the down payment u would of lost the 6000 which can be covered by gap

[C7LT1]

I am not saying others advise is wrong, I just have a different view point.

New Car Purchase:

Remember new cars depreciate a lot faster then used soooo....

Put at least 10% down, pay TTL out of pocket and skip the GAP insurance. This is of course after you get the best price possible. 

Always make extra principal payments when you can. This combined with a good downpayment will ensure you are every upside down.

Remember the less you finance the lower your monthly payments will be and the less you will pay in interest even if you rate of 0.9%.

Used Car Purchae:

If you buy at market value the same as above applies however if you find a great deal well below market value the finance the whole thing.

Ex. in  2011 I brought a used 2010 Nissan Alitma Coupe and I financed 100% of the cost to include TTL and a 100k warranty. My OTD cost

for everything was $17.5K. The car book value was $20k at that time. No gap and was never upside down. 

One more point:

Having Gap will not help if you decide in 2-3 years you want to trade in your car for something else or you lose the ability to make the payments

and you have to sell the car to get something cheaper. 

[StartingOver10]

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@C7LT1 wrote:

I am not saying others advise is wrong, I just have a different view point.

New Car Purchase:

Remember new cars depreciate a lot faster then used soooo....

Put at least 10% down, pay TTL out of pocket and skip the GAP insurance. This is of course after you get the best price possible. 

Always make extra principal payments when you can. This combined with a good downpayment will ensure you are every upside down.

Remember the less you finance the lower your monthly payments will be and the less you will pay in interest even if you rate of 0.9%.

Used Car Purchae:

If you buy at market value the same as above applies however if you find a great deal well below market value the finance the whole thing.

Ex. in  2011 I brought a used 2010 Nissan Alitma Coupe and I financed 100% of the cost to include TTL and a 100k warranty. My OTD cost

for everything was $17.5K. The car book value was $20k at that time. No gap and was never upside down. 

One more point:

Having Gap will not help if you decide in 2-3 years you want to trade in your car for something else or you lose the ability to make the payments

and you have to sell the car to get something cheaper. 

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Totally agree with the above 100%

Just because you can get a vehicle with zero down, doesn't mean it is a sound financial decision for the long term.  Give yourself options. If you aren't upside down, then you have options if life hits you with lemons down the road.  

[Anonymous]

Fwiw my first comment did state the exact purpose of a down payment. The Only time a down-payment matters , assuming gap, is for resale value. If you plan on keeping this car forever, down-payment doesn't matter beyond it being a method to keep your payment lower. This matters more at higher interest rates, but less the higher the score. OP seems to have a healthy score and will likely secure a nice rate. They're also planning to buy quite the car for their income, so I do hope you plan on keeping that as it is.

Make sure you educate yourself on car prices, don't overpay, use research websites, don't sell the car for at minimum a year(which if your going to sell a car in a year, don't buy it so this should go without saying) and you should be fine. Your other car alone would be plenty for a down payment assuming you don't buy a car with horrible depreciation like a dodge dart.

[whaddupmia07]

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@C7LT1 wrote:

I am not saying others advise is wrong, I just have a different view point.

New Car Purchase:

Remember new cars depreciate a lot faster then used soooo....

Put at least 10% down, pay TTL out of pocket and skip the GAP insurance. This is of course after you get the best price possible. 

Always make extra principal payments when you can. This combined with a good downpayment will ensure you are every upside down.

Remember the less you finance the lower your monthly payments will be and the less you will pay in interest even if you rate of 0.9%.

Used Car Purchae:

If you buy at market value the same as above applies however if you find a great deal well below market value the finance the whole thing.

Ex. in  2011 I brought a used 2010 Nissan Alitma Coupe and I financed 100% of the cost to include TTL and a 100k warranty. My OTD cost

for everything was $17.5K. The car book value was $20k at that time. No gap and was never upside down. 

One more point:

Having Gap will not help if you decide in 2-3 years you want to trade in your car for something else or you lose the ability to make the payments

and you have to sell the car to get something cheaper. 

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Acronyms kill. Is TTL taxes and licensing? So are you saying put 10% down PLUS the TTL? I did the new car taxes, fees, and licensing estimate on the CA DMV website which indicated about $2300 for my particular vehicle. So 10% PLUS TTL would be around 5k out of pocket, sound right? 

[Chris679]

Only good down payment is the trade in IMO. Anything else you can accomplish the same thing by paying down on the loan giving you an added cushion if something comes up. Take that $5000 or so, pay down the principal of the loan right away if you want. Now you are maybe a year ahead on the payments. Also you have lowered the % owed on the loan helping your credit score. No need for gap insurance if you don't take out a longer loan than you can afford, 60 mo max.

[C7LT1]

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Acronyms kill. Is TTL taxes and licensing? So are you saying put 10% down PLUS the TTL? I did the new car taxes, fees, and licensing estimate on the CA DMV website which indicated about $2300 for my particular vehicle. So 10% PLUS TTL would be around 5k out of pocket, sound right? 

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 Yes "TTL" is Taxes, Title and licensing. Yes in my opinion put at least 10% down PLUS pay TTL out of pocket. So in your case it would be around $5k out of pocket. I am glad you looked up the fee per your DMV website because a lot of people neglect to figure those cost into the total price of the vehicle. Good job on your research! 

[Anonymous]

The short answer to your question is whatever you can comfortably afford. You're going to get people saying large down payments, small down payments never finance a car just buy it in cash.
Understand that a down-payment is just there to keep your monthly payment/the amount you finance/loan to value in check. Play with bank rates calculators. Know your car price. The above scenario where you get a car 2.5k under the book value WITH warranty and taxes included before paying anything down just isn't realistic. I'm sure that he got a golden deal on that and good for him, that's not something most/anyone can expect. Most people are upside down. *****BEING UPSIDE DOWN ONLY MATTERS IF YOU RESELL THE CAR*** Gap is very very very muchso worth it(not from the dealer) your lender will likely chArge less for gap. Generally between 2-400. THAT is your safety net in being upside down. If you think you aren't gonna keep a car long term, just don't buy it. Boom. There you go. No longer matters if your upside down. It's an ugly and scary word that doesn't matter of you keep the car and like it. Buy the car you like.....and make sure you like it before you buy it.