As you go about purchasing your next vehicle, you might wonder how much your down payment should be.
The ideal amount for a down payment is as much as you can afford as long as you are comfortable with the hit your savings account will take. Ideally, you want to pay enough upfront to prevent you from being “upside-down” on your loan.
A vehicle is worth about half its original value after somewhere around three and a half years. Add interest on top of the purchase price and what happens is that, for a time, you owe more than your vehicle is worth. That’s called being “upside-down.”
One solution is to buy gap insurance, which would cover that gap if your vehicle were stolen or totaled.
Another solution is to pay a down payment in the amount that would prevent you from ever being “upside-down.” This amount will be unique depending on the purchase price, the interest rate and the monthly payment amount.
But, the bottom line is, you can only pay as much as you can comfortably afford. That’s the simple rule when it comes to down payments on a vehicle. Do you have more finance questions? Feel free to reach out to one of our finance specialists at Crown Motor Company to ensure you know everything you need to before you take the plunge!