”How much are you putting down” is the second question that most car salespeople will ask you. It is also the first number that they will try to get you to budge on during the negotiation process. Your credit score may not be on their minds, but it should be on yours. Your worse your credit score is, the more money you will have to have upfront, especially, if you need a bad credit auto loan.
Bad credit auto loans are usually for people whose credit score has slipped under 650. You should obtain this score before you go to the dealership. If you have a low credit score, you are viewed as a credit risk, so look at it this way, if you do not have much of your own money invested in the car, it is easier to walk away from the loan. That is why a lender who specializes in bad credit car loans will want to see 10-20% down.
A larger down payment benefits you in several ways:
- Increases your chance of being approved for financing. No one wants to be embarrassed by a denial.
- Lowers your overall interest costs. That is money in your pocket.
- You can shorten the length of the loan. The longer you pay on a loan, the greater the chances are of having negative equity in the loan. Shortening the loan can prevent that as well as save on the amount of interest paid over the life of the loan. These days, 36 months is seen as pretty short.
It may be less than desirable to know you will have to drop $2,000 or more on a down payment, but, if you manage this loan well, it may be the last time you have to do it.