No Money Down: Problem Or No Problem?

Automotive Finance, Used Cars

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used car down payment

Although Ride Time works tirelessly with many financial institutions to help get their customers the loan they need to buy the used car of their dreams, there are times when a person’s credit history or income can be a hurdle. If you have a less-than-stellar credit rating or no credit history at all, then the lender might be more willing to finance your used car if you have money to put down. Unfortunately, though, not everyone has the money available to make a substantial down payment on their car.

The question of whether you should buy a used car that you can afford or take out a loan for a slightly better one can be a tricky question. If you buy a used car with high mileage or one that is older, you run the risk of incurring repair and maintenance charges — which can sometimes cost you more than the car. Before you decide to use your money to buy an older used car or to use it as a down payment for an upgrade, consider these 4 factors.

1. Know where you stand

The best way to make the right decision for your financial situation is to figure out where your finances are currently. Calculating how much you make monthly, what bills you have, and how much you have in savings is critical to know how much you should extend yourself financially. If you want to get a loan, then you also need to know whether you are capable of doing so, which will involve checking your credit rating to see where you stand. 

If it is possible to get a loan, you need to figure out how much you can realistically pay per month. If you use all your savings as a down payment, then you might be putting yourself in a risky position if an emergency happens. Taking all things into consideration before committing to buying or financing a car is imperative to keep your financial head above water.

2. If you are going to buy with no down payment, your interest rate is probably going to be higher

If you don’t have any savings for a down payment, then recognize that a lender will probably charge you more in interest. If you buy a used car without putting money down, you have no ‘skin in the game,’ so to speak. That means if you don’t put anything into buying your used car, then the bank will consider you a bigger risk if you should default. In that case, they will likely charge you a higher interest rate. If you choose to purchase a used car without putting any money down, make sure to shop around before settling on the first lender who will give you money. Luckily, Ride Time works with many financial lenders, which will make it easy for you to compare rates.

3. If you have the time to wait, sometimes saving is a good idea

If you don’t need a used car immediately, it might be a good idea to save up some money for a down payment to get the used car of your dreams. Instead of settling for the first car you can afford, take the time to put some money away so that when the car you want is available, you will have the down payment necessary. That will make it more likely that you can borrow money and at a lower interest rate than if you rush into buying a car that you aren’t that enthusiastic about, or that you will end up paying much more for in interest in the end.

4. Should you get a cosigner?

Sometimes if you can’t secure a loan on your own, you might be able to get a cosigner without any down payment. There are two drawbacks to having a cosigner. One is that if you default on the loan or make late payments, you are not only hurting your credit rating, but you are also hurting the cosigner since their name is also on the loan. The second drawback is that the other “purchaser” has rights to the car, which means that they can also make decisions about it since you are not the sole owner.

Down payments are a dilemma to many people in the market for a used car. Should you use a down payment or finance the total cost of the car? That depends on what your credit rating is, what resources you have, and whether you have time to wait or not. Come see us at Ride Time to discuss the best options to help you ride away in the car of your dreams!


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