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

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

Lower your payments
The more you pay upfront when you’re buying a new car, the lower your monthly payments will be. The Federal Trade Commission, a government agency aimed at protecting consumers, suggests that saving for a down payment can reduce the overall amount that you will have to finance, decreasing interest costs in the long run.

Consider depreciation
Some industry experts say that 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 few months of ownership, like the car being totaled in a wreck, you won’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.

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