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How much down should you put on a car?


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Wondering what a good percentage to put down is? Im looking at used and new and the budget is no more than 20k max so that limits most new cars. 700 credit score. Will more down give a better finance rate? 

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12 hours ago, Caddypower said:

Wondering what a good percentage to put down is

 

This is a really broad question, and it depends on your objective(s).

 

What's important here?

 

- Conserving cash upfront so you don't have to dig too deeply into your emergency savings?

- Better APR?

- Avoiding the inclination to spend hundreds of dollars on GAP?

- Minimizing interest expense over the term of the loan?

- Getting approved?

- Lower payments?

 

Out of curiosity, what kind of vehicle are you looking for?  If you'd consider an electric vehicle, there are cars like the Nissan Leaf that are leasing for under $100 a month right now.

 

If I had budget constraints, I'd strongly consider that, or buying something used that lasts forever like a Lexus RX. 

 

We needed a "temporary" car almost 7 years ago, so we picked up a used '08 with almost 90,000 miles for around $18k, and our need became semi-permanent but the damn thing just won't die.

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If you have good enough credit to be prime, then your loan pricing is usually based on one or two factors.

 

#1 purely your FICO score.

#2 combination of your FICO score and the LTV request.

 

Therefore, based on nothing more than the scant personal information you provided, you should pay all the sales tax, dealer doc fee (if any), and any other state mandated fees as your down payment at a minimum.

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  • 2 weeks later...
  • 2 months later...

I like to lease my cars and since the chances of gaining equity in a car lease are slim to none, I like to put 0 down.  In the event of an accident where the car is totaled, you will get nothing back from your insurance company unless you found a unicorn of car that is worth more than the payoff at the time of the accident.  (Actually this is quite possible at the time I'm posting this due to the unique situation where car supplies are dwindling due to the chip shortage) but in ordinary times you will get nothing back.   Gap insurance covers the difference between what your insurance company will pay and what is owed to the lender so it really doesn't make sense to put anything down on a lease.

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23 hours ago, direct said:

I like to lease my cars and since the chances of gaining equity in a car lease are slim to none, I like to put 0 down.  In the event of an accident where the car is totaled, you will get nothing back from your insurance company unless you found a unicorn of car that is worth more than the payoff at the time of the accident.  (Actually this is quite possible at the time I'm posting this due to the unique situation where car supplies are dwindling due to the chip shortage) but in ordinary times you will get nothing back.   Gap insurance covers the difference between what your insurance company will pay and what is owed to the lender so it really doesn't make sense to put anything down on a lease.

 

I don't agree with this at all unless the money factor on the lease is almost zero.

 

For every dollar you pay upfront on the lease, you are reducing the cost of financing.

 

The odds of even having an accident in a 2-3 year timeframe are really low to begin with.

 

And the chances of a 0-3 year old car being totaled after a collision are dramatically lower than a vehicle that's 4+ years old.

 

And then the total exposure is whatever is left after auto insurance and GAP pay out.  This isn't a catastrophic loss for someone with the financial resources to drive a new car every 2-3 years.

 

Insuring against that type of loss isn't worth hundreds of dollars to me over the course of a lease. 

 

Tens of dollars?  I'll think about it.  :) 

 

 

 

 

 

 

Edited by cv91915
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7 hours ago, cv91915 said:

Gap insurance covers the difference between what your insurance company will pay and what is owed to the lender so it really doesn't make sense to put anything down on a lease.

All of the leases I have ever done..............GAP is included in the contract language of the lease.   Couldn't sell it if I wanted to and the consumer agreed.

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5 hours ago, MarvBear said:

All of the leases I have ever done..............GAP is included in the contract language of the lease.   Couldn't sell it if I wanted to and the consumer agreed.

 

Most of the captive finance companies include GAP coverage, or, perhaps more commonly, GAP waiver. 

 

I think TFS (Toyota and now Mazda, and possibly Lexus) is the main exception.  Not sure about SETF.

 

My thinking on down payments on leases has become more nuanced since I last commented.  :) 

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On 7/10/2021 at 3:20 AM, cv91915 said:

 

I don't agree with this at all unless the money factor on the lease is almost zero.

 

For every dollar you pay upfront on the lease, you are reducing the cost of financing.

 

The odds of even having an accident in a 2-3 year timeframe are really low to begin with.

 

And the chances of a 0-3 year old car being totaled after a collision are dramatically lower than a vehicle that's 4+ years old.

 

And then the total exposure is whatever is left after auto insurance and GAP pay out.  This isn't a catastrophic loss for someone with the financial resources to drive a new car every 2-3 years.

 

Insuring against that type of loss isn't worth hundreds of dollars to me over the course of a lease. 

 

Tens of dollars?  I'll think about it.  :) 

 

 

 

 

 

Well, we have a difference of opinion.  Fortunately, for me, this just happened to me with a 2019 Lincoln Continental.  Exactly 2 years to the day of leasing the car, a hit and run driver (driving a stolen car) smashed into the rear of my car at a high rate of speed.  Fortunately, I wasn’t hurt, but the car was totaled.   Had I put anything down on the lease, I would have kissed that goodbye.  I walked away from the remainder of the lease just having to pay the deductible.  My insurance cut a check over $50k to pay off the leasing company and Gap filled in the rest.  Proceed at your own risk, but to think the odds of not getting into an accident with a new car vs an old car is a bit naive. 

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14 hours ago, direct said:

Well, we have a difference of opinion.  Fortunately, for me, this just happened to me with a 2019 Lincoln Continental.  Exactly 2 years to the day of leasing the car, a hit and run driver (driving a stolen car) smashed into the rear of my car at a high rate of speed.  Fortunately, I wasn’t hurt, but the car was totaled.   Had I put anything down on the lease, I would have kissed that goodbye.  I walked away from the remainder of the lease just having to pay the deductible.  My insurance cut a check over $50k to pay off the leasing company and Gap filled in the rest.  Proceed at your own risk, but to think the odds of not getting into an accident with a new car vs an old car is a bit naive. 

 

Everyone who pays for unnecessary insurance coverage feels vindicated when they have a loss.

 

By your logic, everyone should take the smallest deductible available because only a fool pays $1,000 or $1,500 out of pocket when they have an accident, when they could have simply chosen the $250 deductible to reduce their exposure.

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For me, in the end it comes down to math.  Everything else aside, if I think I can reasonably earn an after tax return that is better than the cost of the lease (money factor), I would not put any additional funds down except drive-offs (I usually use 4-5% pre-tax as a baseline, tax effect, convert to MF by dividing by 2400 and comparing that to lease MF).  If it is close, or the cost of the lease outweighs that reasonable return then reducing the amount subject to interest is smart money (as smart as one can be when car leasing).  The odds of totaling the car are maybe a tiebreaker, but not a significant part of the equation.  I will admit I used to be hard in the never put money down on a lease camp, but have changed my thinking.

 

The ideal situation is those lenders who offer a multiple security deposit program, where you can buy down the money factor with fully refundable security deposits, which get returned even in the case of a total loss.

Edited by CTSoxFan
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On 7/10/2021 at 10:22 AM, hegemony said:

for a loan, put down enough so you don't need to finance longer than 36 months.

To this I would also add "put down enough to avoid being upside down"  

 

These two things work well together...

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On 7/24/2021 at 7:40 AM, centex said:

To this I would also add "put down enough to avoid being upside down"  

 

These two things work well together...

 

Especially if you are not financially solvent enough that were you to experience a total loss and not have GAP coverage the subsequent negative balance would have a material impact on your financial picture.

 

The problem is that in most cases those who are in this bucket can't afford to do the two things you suggest...

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  • 5 weeks later...

When it comes to a down payment on a new car, you should try to cover at least 20% of the purchase price. For a used car, a 10% down payment should do. Part of your decision will depend on where your credit score stands. Good luck.

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4 hours ago, ShaunAndrews said:

When it comes to a down payment on a new car, you should try to cover at least 20% of the purchase price. For a used car, a 10% down payment should do. Part of your decision will depend on where your credit score stands. Good luck.

In the current market, that is not always prudent guidance.  Cheap money means that some of the principles from prior to the mid-80's have ceased to rule the roost...this especially holds true on used vehicles where it is quite possible to find something today that is worth MORE driving off the lot than what you paid. 

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