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Can I put 50 down on a car?

If I put a large down payment (over 50%) towards a car loan, can I reduce my interest rate and is it smart to even put that much down?

I’ve saved a lot but not enough money for a car. I am looking to buy a nissan versa which is ~13000 out the door. I have ~11000 that I can put towards a down payment so I am just shy of the full price out right. My question is that if I approach the bank and say, «hey (look at my account), I am willing to put down 11k for a 13k loan on an asset that will depreciate to ~11k that first year in exchange for a great interest rate (something like 1-4%). The bank basically gets a great low risk opportunity here. Am I missing something? My credit score is 800 something. but I am young and do not have much history or debt (which apparently is a bad thing?) I am looking for an answer to see if this will reduce my rate or if it doesnt even matter how much I lay down. Moreover, I’m looking for someone to stop me saying this whole deal is cray-cray because. if there is a reason.

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asked Nov 13, 2014 at 21:50
matt matt
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6 Answers 6

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Can you reduce your interest rate? Talk to the lender. Maybe. Probably not. The rate reflects their perception of how much of a risk they’re taking with the loan.

But if all you’re borrowing is $2000, the savings that you might get out of any adjustment to the rate is not going to be all that significant. Sure, it would be nice, but it’s not going to be enough to make or break your decision to buy this car. The big savings will be that you’re paying interest on a much smaller loan, which means you can reduce your payments and/or pay it off more quickly.

REMINDER: NEVER TALK TO AN AUTO DEALER ABOUT FINANCING UNTIL AFTER THE PRICE OF THE CAR HAS BEEN NAILED DOWN — otherwise they will raise the purchase price to cover the cost of offering you an apparently cheap loan.

answered Nov 13, 2014 at 22:33
keshlam keshlam
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I totally overlooked that simple fact! and yeah as a general rule I want to just come to the dealer with a pre-approved loan from my bank.

Nov 14, 2014 at 0:49
That reminder is awesome, should be put in bold letters somewhere visible at every car dealer
Feb 27, 2015 at 20:11

Talk to your bank first but shop around a bit as well with other reputable lenders in your area.

Another option, if you’re willing to put down ~84% of the purchase price would be to talk to several dealerships BEFORE you set foot on a single lot. Tell them that you are interested in buying a Versa and that you are willing to pay cash but you are not willing to pay more than $10,200. They won’t agree (trust me on that) but they will come down from $13,000. Say «Thanks, I’ll call you back.» and call one of the other dealerships on your list and tell them «I just spoke with this dealership and they are willing to sell me the car for [whatever number they gave you].» One of two things will happen, either the dealership will come back with a lower price or they will tell you to go buy the car there. Continue this process until you have one dealership left.

I did this with 3 dealerships in 2011 and bought a truck with a $27,000 sticker price for just over $19,000. It took about a week to make all of the calls and I ended up going to a dealership 3 hours away but it was worth it for $8,000.

answered Feb 27, 2015 at 19:25
geewhiz geewhiz
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With that credit rating you should have no trouble getting a rate in that range. I have a similar credit score and my credit union gave me a car loan at 1.59%. No haggling required.

In regards to your question, I think you have it backwards. They are more likely to give you a good rate on a high balance than a low one. Think about it from the bank’s perspective.

«If I give you a small sale, will you give me a discount?»

This is the question you are asking. Their profit is a factor of how much you borrow and the interest rate. Low rate=less profit, low financing amount = less profit.

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The deal you proposed is a lose-lose for them.

answered Feb 27, 2015 at 19:12
JohnFx ♦ JohnFx
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I had a strange experience buying a new car. They were offering a deal of 0.9% interest on the loan but only if the loan was above a certain amount. Below that amount, the interest rate was something like 3%. Given the amount I was willing to put down, it was cheaper to put less down and get the lower interest rate. So, once you agree to the purchase price, you need to discuss what finance options they offer. You might also check in advance with other loan providers (e.g. your bank) to see what offers they have.

answered Nov 13, 2014 at 23:37
Eric Eric
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That is odd but I would have to run the numbers. If that is the case for me, then it would still be cheaper to take the 3% (assumption made that min down on loan is 20%).

Nov 14, 2014 at 0:50

Usually, the under-1% loans (sometimes 0%) are paid for by taking additional profit out of the sale of the car.. unless you get the price of the car nailed down HARD first. Also, as always, be sure you understand whether they’re variable-rate loans (they usually are), how much they may go up per year, and what maximum they’re allowed to rise to. Especially right now, when rates are historically low, you can generally bet that the initial rate on a variable-rate loan won’t last.

Nov 14, 2014 at 1:35

@keshlam The price of the car was negotiated before discussing financing. It was after closing time on the last day to make the sale count for the month so I suspect they were just in a hurry to get the deal done. The finance guy was good at running the numbers on how much interest I would pay with different down payments and resulting interest rates.

Nov 14, 2014 at 2:39

@keshlam, while your advice holds true in general. In my case, I plan on getting a fixed rate loan from my credit union and have that preapproved before I even go to the dealer. At the dealer, I’m just there to test drive and pay. I already know what the out the door price should be (a friend bought the exact same car there a few months ago).

Nov 18, 2014 at 15:52

Those rates are not implausible. The loan company might figure 1% of $20,000 is more than 3% of $5,000. A lot of the cost of a loan is doing the paperwork, which is the same for a big loan as for a small loan. That’s why «payday loans» have such high rates: Sure, if they charge you $20 to loan you $500 for 2 weeks, as a percentage that’s 96% annual interest! Outrageous! But . they have to pay somebody to do the paperwork. That probably blows most of the 20 bucks right there. (Plus the fact that somebody who needs to borrow money to pay the rent is probably not the best risk.)

Feb 27, 2015 at 19:01

The real answer is to talk to the bank.

In the case of the last car loan I got, the answer is «no». When I asked them about rates, they gave me a printed sheet that listed the loan rates they offered based on how old the car was, period. I forget the exact numbers but it was like: New car: 4%, 1 year old: 4.5%, 2-3 years old 5%, etc.

I suspect that at most banks these days, it’s not up to the loan officer to come up with what he considers reasonable terms for a loan based on whatever factors you may bring up and he agrees are relevant. The bank is going to have a set policy, under these conditions, this is the rate, and that’s what you get. So if the bank includes the size of the down payment in their calculations, then yes, it will be relevant. If they don’t, than it won’t. The thing to do would be to ask your bank.

If you’re only borrowing $2000, and you’ve managed to save up $11,000, I’d guess you can pay off the $2,000 pretty quickly. So as Keshlam says, the interest rate probably isn’t all that important. If you can pay it off in a year, then the difference between 5% and 1% is only $80. If you’re buying a $13,000 car, I can’t imagine you’re going to agonize over $80.

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BTW I’ve bought two cars in the last few years with about half the cost in cash and putting the rest on my credit card. (One for me and one for my daughter.) Then I paid off the credit card in a couple of months. Sure, the interest rate on a credit card is much higher than a car loan, but as it was only for a few months, it made very little real difference, and it took zero effort to arrange the loan and gave me total flexibility in the repayment schedule. Credit card companies often offer convenience checks where you pay like 3% or so transaction fee and then 0% interest for a year or more, so it would just cost the 3% up front fee.

Down Payment Calculator

The three calculations below offer different ways to help calculate an estimated down payment.

Use the Upfront Cash Available

If the amount of upfront cash available and down payment percentages are known, use the calculator below to calculate an estimate for an affordable home price.

Home Price: $217,391

Use the Home Price

If the home price and down payment percentages are known, use the calculator below to calculate an estimate for an amount needed in cash available for upfront costs.

Cash Needed: $46,000

Use the Home Price and Upfront Cash Available

If the home price and amount of upfront cash available are known, use the calculator below to calculate an estimate for a down payment percentage.

Down Payment: 22.0%

What is a Down Payment?

A down payment is the upfront portion of a payment that is often required to finalize the purchase of items that are typically more expensive, such as a home or a car. When purchasing a home, after a down payment is paid by a home-buyer, any remaining balance will be amortized as a mortgage loan that must be fulfilled by the buyer. In other words, the purchase price of a house should equal the total amount of the mortgage loan and the down payment. Often, a down payment for a home is expressed as a percentage of the purchase price. As an example, for a $250,000 home, a down payment of 3.5% is $8,750, while 20% is $50,000.

Closing Costs

It is important to remember that a down payment only makes up one upfront payment during a home purchase, even though it is often the most substantial. There are also many other costs that may be involved, such as upfront points of the loan, insurance, lender’s title insurance, inspection fee, appraisal fee, and a survey fee. A very rough estimate for the amount needed to cover closing costs is 3% of the purchase price, which is set as the default for the calculator.

Different Loans, Different Down Payment Requirements

In the U.S., most conventional loans adhere to guidelines and requirements set by Freddie Mac and Fannie Mae, which are two government-sponsored corporations that purchase loans from lenders. Conventional loans normally require a down payment of 20%, but some lenders may go lower, such as 10%, 5%, or 3% at the very least. If the down payment is lower than 20%, borrowers will be asked to purchase Private Mortgage Insurance (PMI) to protect the mortgage lenders. The PMI is normally paid as a monthly fee added to the mortgage until the balance of the loan falls below 80 or 78% of the home purchase price.

To help low-income buyers in the U.S., the Department of Housing and Urban Development (HUD) requires all Federal Housing Administration (FHA) loans to provide insurance to primary residence home-buyers so that they can purchase a home with a down payment as low as 3.5% and for terms as long as 30 years. However, home-buyers must pay an upfront mortgage insurance premium at closing that is worth 1.75% of the loan amount, on top of the down payment. In addition, monthly mortgage insurance payments last for the life of the loan unless refinanced to a conventional loan. For more information about or to do calculations involving FHA loans, please visit the FHA Loan Calculator.

Also, in the U.S., the Department of Veterans Affairs (VA) has the ability to subsidize VA loans, which do not require a down payment. Only two other entities, the USDA and Navy Federal, allow the purchase of a home without a down payment. For more information about or to do calculations involving VA mortgages, please visit the VA Mortgage Calculator.

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Large vs. Small Down Payment

Paying a larger down payment of 20% or more, if possible, usually lead to qualification for lower rates. Therefore a larger down payment will generally result in the lower amount paid on interest for borrowed money. For conventional loans, paying at least a 20% down payment when purchasing a home removes the need for Private Mortgage Insurance (PMI) payments, which are sizable monthly fees that add up over time.

One of the risks associated with making a larger down payment is the possibility of a recession. In the case of a recession, the home value will likely drop, and with it, the relative return on investment of the larger down payment.

Making a smaller down payment also has its benefits, the most obvious being a smaller amount due at closing. Generally, there are a lot of different opportunity costs involved with the funds being used for a down payment; the funds used to make a down payment can’t be used to make home improvements to raise the value of the home, pay off high-interest debt, save for retirement, save for an emergency fund, or invest for a chance at a higher return.

Down payment size is also important to lenders; generally, lenders prefer larger down payments. This is because big down payments lower risk by protecting them against the various factors that might reduce the value of the purchased home. In addition, borrowers risk losing their down payment if they can’t make payments on a home and end up in foreclosure. As a result, down payments act as an incentive for borrowers to make their mortgage payments, which reduces the risk of default.

Where to Get Down Payment Funds

Savings—Most home-buyers save up for their down payments by setting aside savings until they reach their desired target, whether it’s 20% or 3.5%. Having the savings in an interest-bearing account such as a savings account or in Certificates of Deposit (CDs) can provide the opportunity to earn some interest. Although placing down payment savings in higher risk investments such as stocks or bonds can be more profitable, it is also riskier. For more information about or to do calculations involving savings, please visit the Savings Calculator. For more information about or to do calculations involving CDs, please visit the CD Calculator.

Piggyback Loan—In situations where the home-buyer doesn’t have sufficient funds to make the required down payment for a home purchase, they can try to split their mortgage into two loans. A piggyback mortgage is when two separate loans are taken out for the same home. Generally, the first mortgage is set at 80% of the home’s value and the second loan is for 10%. The remaining 10% comes from the home-buyer’s savings as a down payment. This is also called an 80-10-10 loan. Home-buyers may use piggyback mortgages to avoid PMI or jumbo financing.

Down Payment Assistance Programs—Local county or city governments, local housing authorities, and charitable foundations sometimes provide grants to first-time home-buyers. State-wide programs can be found on the HUD website. Down payment assistance is usually only reserved for need-based applicants purchasing a primary residence. Grants can come in the form of money applied to a down payment or an interest-free loan meant to supplement a main mortgage. Applicants usually still need to have decent credit and documented income. Grants may need to be repaid if the home is sold.

Gift Funds—FHA loans allow for the down payment to be a gift from a friend or family member, and the entire down payment can be considered a gift as long as there is a gift letter stating that it is a gift that does not require repayment.

IRA—The principal contributed to a Roth IRA (individual retirement account) can be withdrawn without penalty or tax. In contrast, contributions from a traditional IRA will be subject to regular income tax as well as a 10% penalty if the contributions are withdrawn prior to the age of 59 ½. However, there is an exclusion that allows a person to withdraw $10,000 from both types of IRAs (including earnings for a Roth IRA) without penalty or tax for the purchase, repair, or remodeling of a first home. The funds can also legally be used to purchase a home for a spouse, parents, children, or grandchildren. The only caveat is that the home-buyer is only given 120 days to spend the withdrawn funds, or else they are liable for paying the penalty. Spouses can each individually withdraw $10,000 from their respective IRAs in order to pay $20,000 towards their down payment. The $10,000 limit is a lifetime limit.

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401(k)—It is possible to take out a loan for either up to $50,000, or half the value of the 401(k) account, whichever is less. This loan will require repayment with interest, but there will be no tax or penalties on the loan amount. Interest and principal will be paid back to the 401(k) owner. However, taking out a loan, especially a large one, can affect qualification for or ability to repay a mortgage. Most plans only give five years to repay the loan, and borrowing a large amount can result in substantial payback pressure.

Is 50% a good down payment on a car?

When you make a really large down payment, say around 50%, you’re going to see your auto loan really change for the better. Making a down payment as large as 50%t not only improves your chances for car loan approval, it also: Reduces interest charges. Gives you a much smaller monthly payment.

Is it good to put half down on a car?

As a general rule, aim for no less than 20% down, particularly for new cars — and no less than 10% down for used cars — so that you don’t end up paying too much in interest and financing costs. Benefits of making a down payment can include a lower monthly payment and less interest paid over the life of the loan.

What percent of a car is a good down payment?

It’s a good idea to make a down payment of 10 to 20 percent. However, generally speaking, the more you can put down, the less interest you’ll pay in the long run. The trick is to balance what you would like to pay with what you can reasonably afford.

What is a good down payment for a 30k car?

As a general rule of thumb, it’s recommended that you put down at least 20% on a new vehicle, and at least 10% on a used car. Depending on the car’s selling price, this could mean shelling out quite a bit of cash. Down payment examples for new cars.

Is it wise to put a large down payment on a car?

Putting more than 20% down can save you money in the long run, even if the purchase price is the same. Auto loans carry interest, meaning you’ll pay back more money over time than you initially borrowed. Putting down more money on the car will save you some amount of interest.

How Dealers turn your Cash down into profit! Car Buying Tips

What not to say to a dealer?

Things to Never Say to a Dealer

  • “I’m ready to buy now.” .
  • “I can afford this much per month.” .
  • “Yes, I have a trade-in.” .
  • “I’m only buying the car with cash.” .
  • “I’m not sure…which model do you think I need?” .
  • “Oh, I’ve wanted one of these all my life.” .
  • “I’ll take whatever the popular options are.”

What are the disadvantages of a large down payment?

Drawbacks of a Large Down Payment

  • You will lose liquidity in your finances. .
  • The money cannot be invested elsewhere. .
  • It is inconvenient if you will not be in the house for long. .
  • If the home loses value, so does your investment. .
  • You might not have the money to begin with.

What is considered a high car payment?

According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn’t your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

How much of a down payment do I need for a 40000 dollar car?

If you’re following the recommendation of 20% down, you’re looking at a down payment of at least $7,818 based on the MSRP alone.

How much are payments on a $40000 car?

If you take a car loan of $40000 at an interest rate of 4.12% for a loan term of 72 months, then using an auto loan calculator, you can find that your monthly payment should be $628. When the loan term changes to 60 months, the monthly payment on a $40000 car loan will be $738.83.

What is a good down payment for a 35k car?

A down payment between 10 to 20 percent of the vehicle price is the general recommendation.

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How much should I put down on a 20k car?

This varies by lender, and some may accept the lesser amount. On a $20,000 car, that would be up to $2,000 down. There’s another common adage for down payments though, and it mostly holds true. If you’re financing a used car, you should aim to put down at least 10%; put down 20% or more on a new car if you can.

Is it smart to put money down on a car?

You should always have a down payment when buying a car. Some experts say it might not be necessary if you’re able to score 0 percent APR — but most people won’t qualify for that. Dealers offer zero-down financing because they stand to make the most in interest. After all, it is the opposite of a large down payment.

Does a higher down payment make your offer stronger?

A higher down payment shows the seller you are motivated—you will cover the closing costs without asking the seller for assistance and are less likely to haggle. You are a more competitive buyer because it shows the seller you are more reliable.

What is the best way to pay a down payment on a car?

The most common form of down payment is cash or its equivalent. Dealerships generally accept personal checks, money orders or even credit cards. You can also trade-in your vehicle as a form of down payment for your purchase.

What credit score is needed to buy a car?

In general, you’ll need a credit score of at least 600 to qualify for a traditional auto loan, but the minimum credit score required to finance a car loan varies by lender. If your credit score falls into the subprime category, you may need to look for a bad credit car loan.

How much is $40 000 car payment for 60 months?

In this case, your monthly payments on a $40,000 loan would be $634 a month. At 60 months, it would be $745 per month.

How much is $30,000 car payment for 60 months?

For example, the total interest on a $30,000, 60-month loan at 4% would be $3,150. So, your monthly payment would be $552.50 ($30,000 + $3,150 ÷ 60 = $552.50).

How much of a down payment do I need for a 60000 car?

As a general rule, you should pay 20 percent of the price of the vehicle as a down payment.

What is a realistic monthly car payment?

The average monthly car loan payment in the U.S. is $700 for new vehicles and $525 for used ones originated in the third quarter of 2022, according to credit reporting agency Experian. It’s worth noting that recent reports from other industry analysts place the average monthly car payment even higher for new vehicles.

Is $500 a month a lot for a car payment?

Is $500 Too Much for a Monthly Car Payment? Paying $500 for a car loan monthly payment in 2019 would definitely have been too much. But in 2022, when the average monthly payment is $648, consider yourself lucky if you have just $500 to pay!

Is a 7 year car loan too long?

An 84-month auto loan can mean lower monthly payments than you’d get with a shorter-term loan. But having as long as seven years to pay off your car isn’t necessarily a good idea. You can find a number of lenders that offer auto loans over an 84-month period — and some for even longer.

Can I change my down payment after accepted offer?

Can I change my down payment before closing? Whether you’ve experienced a cash windfall or the closing process is taking long enough that you’ve been able to save more, most lenders will allow you to make a larger down payment.

Is it better to have a bigger down payment or less debt?

If you’re not focusing on paying down debt faster, you may pay for it in interest charges on your outstanding balances. It won’t help your credit. Although a larger down payment can make it easier to qualify for a lower interest rate, it won’t help much if your credit scores are being dragged down by high debt.

Are big down payments good?

Besides the obvious benefit of a lower loan amount, a higher down payment may reduce other monthly costs like private mortgage insurance (PMI). Lenders waive PMI with at least a 20% down payment because they consider it less likely you’ll default on your mortgage. You’ll deplete more of your cash reserves.

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