What size down payment should I put on a car? | Refresh Financial

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Financing a Car: Does The Size Of Your Down Payment Matter?

Financing a car can be great for credit building. If you’re looking to finance a car, and you’re working hard to save your down payment, you might be wondering just how long you should keep saving. How big should your down payment be when financing a car? Does your down payment have an affect on the price in the long run?

The answer is that your down payment matters when it comes to all of these factors. The size of your car down payment can be the difference between getting yourself into a new car and not being able to. The larger your down payment is on your new vehicle, the better off you’re going to be from just about every angle.

Consider the following facts:

The larger your down payment, the lower your interest rate will likely be

This is because a hefty down payment paints a picture of a financially stable borrower. Lenders will see your down payment as evidence that's able to manage their money and who can pay back the money they owe. On the flipside, if you walk into a dealership with next to nothing as a down payment, it makes you look almost desperate to get yourself behind the wheel of a new car, despite being unable to afford it.

A larger down payment is going to lower your monthly payments

While the overall cost of your vehicle is important to consider for your long-term financial health, you also have to consider your month-to-month expenses and whether or not you’re going to be able to make ends meet. What you end up paying monthly will have an affect on your credit building efforts as well as your effort to meet all of your financial obligations.

The more you pay upfront, the less you’re going to need to borrow

Borrowing less means paying less interest and during the duration of the loan, that will bring down the total you’re paying for your vehicle. This makes credit building so much easier.

The more you pay up front, the shorter your loan term is going to be

Because the amount you end up borrowing will be less, you’ll be paying it off for a shorter period of time and you'll see your credit building efforts work much faster.

A larger down payment means easier credit approvals if you have low credit

If you have a below average credit score, a larger down payment can improve your chances of being approved for financing.Do you know how much having a good credit score will save you in car interest payments? Check out our car-loan interest calculator to find out!

You won't have a financial commitment for as long

A larger down payment means a shorter term, which significantly reduces the chances of not being able to fulfill your repayment obligations.

It’s important to remember that coming up with a big down payment should not get in the way of day-to-day life. You shouldn't dip into your emergency fund, and you shouldn’t touch much of your savings. You want to leave yourself in a decent financial situation and with a good credit score after you’ve driven the car off the lot. As such, saving a down payment for a car should be done apart from everything else you do with your money. Start a new savings account just for a car if that is what your plan is.

There’s a great way to jump-start that saving and that’s with a Refresh Financial secured savings loan. You don’t put any money down up front, and your credit score will steadily climb as your savings build in the secured savings loan. Once you’ve paid the secured savings loan down, you have access to the payout. Put that aside for a down payment on your new car and increase your credit rating and chances of financing a car approval at the same time! .


If buying a car is a top priority for you, start making plans to improve your credit now! The sooner you start building credit, the sooner you will qualify for a lower interest car loan. Refresh Financial has a credit building program that can get you into a car sooner than you thought!


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