This is a question that hundreds of thousands of Canadians struggle with every year as they grapple with financing or leasing their next car, truck, or SUV. Thankfully, Used Cars Canada is here to help explain what a down payment is, what the advantage of a down payment is, how it can help reduce your payments, and many other questions.
What is a down payment?
A down payment is the initial amount of money put towards something that has been purchased on credit. Depending on the total cost of the item you’re purchasing, there may be a minimum down payment required.
Do I need to make a down payment?
Not necessarily. While making a down payment is highly recommended, most financing or leasing plans can be obtained without one. However, some special financing or leasing deals may only obtainable with a minimum down payment, so ensure you carefully read the contract and talk with the financial representative.
How does a down payment reduce the payment I make?
When you make a down payment, you are reducing the overall amount you are still owing. Your payments (regardless of bi-weekly, monthly, etc.) are calculated from the amount you still owe on the vehicle. Therefore, if you owe less on said vehicle, the lower your payments will be!
Does Used Cars Canada offer leasing or financing?
No, Used Cars Canada does not offer any lease or finance deals. However, if you wish to lease or finance a vehicle on our website, we will be more than happy to put you in contact with the dealership that owns said vehicle. The dealership will work with you to create the perfect financing or leasing deal.
Do I have to finance my vehicle with the dealership?
No! While the dealership may offer lower payments or interest rates, this is not always the case. You can also finance your vehicle through your bank, which may provide better rates than what the dealership can offer. It’s important to consult with both and choose the provider that works best for you.
How large of a down payment should I put on a vehicle?
That depends on the total cost of the vehicle, as well as how much money you’ve got tucked away. Remember, the larger the down payment the lower your payments will be, so ideally your down payment should be large enough to reduce your payments to a point where you can easily afford them.
Can my credit score affect my down payment?
If you have a low credit score, the bank or dealership may ask for a higher down payment in return. This is because a lower credit score portrays you as a ‘riskier’ loan, so they may ask for an increased down payment to help offset that risk.
To summarize, down payments are an important factor in any leasing or financing plan, and can greatly lower the payments you have to make. While not always necessary, it’s usually best for you to place at least some money down to avoid paying more later in interest – as well as proving to the bank/dealership that you have a source of income.
For more helpful tips and facts regarding financing, the car buying process, and everything else regarding car ownership – make sure you check in regularly with us!