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How much of a down payment should I have

Looking to buy a new car on a finance agreement? One of the key elements to every finance package is how much of a down payment you should have. We take a look at the factors you should consider when deciding upon the size of your deposit.

The down payment

When you take out a finance package, most will spread the entire cost of the agreement over the monthly payments. The cost will be set at the start of the package, including the total interest and any other fees. Your down payment is important as this will reduce the amount you have to pay, including interest.

Some finance companies will have a minimum deposit, often around 10%. While they may not encourage it, having a higher down payment is better for you than it is for the finance company. Having a large deposit will reduce the amount you pay. Doing it at the start of the agreement will also lessen the amount of interest. So the bigger the better!

Use your old carís value

One way to increase your deposit is to part exchange your old car towards the agreement. Doing it through the finance will mean you wonít be waiting around too long until you get behind the wheel of your new car. Selling privately is also an option and, while more time consuming, it can often give you more money to put towards your deposit.

The bigger the better

The higher the amount of deposit you have, the less you will have to pay in the finance agreement. It really is that simple. However, the whole point of a finance package is to spread the cost into manageable monthly payments. Your down payment should help reduce the cost of your package but not leave you too much out of pocket.

published: 10/10/2018 14:53:40

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