While some Maryland drivers can afford to purchase a new car with cash at hand, in order to get behind the wheel, most people need to take out a financing plan. Here at Herb Gordon Subaru, our Subaru finance experts understand that car financing can be tricky, with concepts such as the down payment, monthly interest, and APR.
We are here to walk you through the car financing process and answer any questions that you may have.
What Is the Down Payment?
Even if you finance a car, you will need to pay a small amount upfront, which is called the down payment. The size of your down payment can affect your overall car loan in a number of different ways:
- Monthly payment amount
- Interest rate
- Repayment term
While there is no one-size-fits-all answer for how much of a down payment you should make on a car, most car finance experts recommend that you should cover at least 20 percent of the purchase price of a new Subaru car and 10 percent of a used Subaru car.
Why Do Experts Recommend 20%?
Here are some reasons why 20 percent is a recommended amount:- A lender might extend better terms, such as a lower interest rate when your down payment is higher.
- A higher down payment can shield you from depreciation, which refers to the shrinking value of your car. The value of a new car declines about 20 percent in the first years.
- A down payment that’s less than 20 percent could put you upside down on your loan. This means that you owe more on the car than what it is worth.
To learn more about auto financing or to start the process, visit Herb Gordon Subaru today.
