Buying a new car: How much should you put down?

The larger your down payment, the lower your monthly payments

When you’re buying a new car, whether you’re financing through an independent lender or through a dealer, you’ll have to decide how much money you want to put down for a down payment.

Lower your payments
The more you put down when you’re buying a new car, the lower your monthly payments. The Federal Citizen Information Center, a huge repository of consumer news maintained by the federal government, suggests you put down a minimum of 10 percent of the purchase price of the car – more if you can afford it.

Consider depreciation
Other experts, say a 20 percent down payment is ideal when you’re buying a new car because it covers the first year’s depreciation. That way, if something happens in the first months of ownership, like the car being totaled in a wreck, you don’t owe more on the car than it’s worth.

Take advantage of cash rebates
Manufacturer cash rebates can help you put down an even larger down payment when you’re buying a new car, decreasing the amount you need to borrow.

Although low interest rates are attractive, a larger down payment may sometimes reduce your monthly payments more than a lower interest rate. With luck, you will be able to take advantage of both.

Related Topics:

• Buying a car
• Car Care
• Car insurance
• Car loans
• Car refinancing
• Guide to buying a car