When you set in to the auto loan arena, you may have a zillion and one questions. One of the biggest questions for car buyers with bad credit or no credit is how much will I need to put down? Getting an auto loan as someone with less than perfect credit sometimes requires a different approach to the auto loan structure itself. Bad credit banks may want to see a certain equity position in your auto loan right from the start. If a lender tells the dealer they want to see a 90% loan to value, this means that they will finance 90% of your auto loan and you need to come up with the rest. To get this to happen the dealer will usually pick some vehicles that they’ve got a good deal on to lessen the amount that you need down. If a car is worth $15,000 and they only paid thirteen thousand for it you might have to put less down on it to get to your 90% than if they paid all $15,000.
Let’s say they did only pay 13,000 for a car that will work for you. Obviously the dealer needs to make at least a small profit to stay in business and to pay their sales guy. Don’t go into this thinking that they can make profit off the next guy. This job is how dealers support their family and it’s selfish of anyone to try to make them work for nothing. If, at the end of your work day your boss came to you and said “we are going to keep the pay for Mondays to ourselves from here on out, don’t worry though, you can work overtime the rest of the week to make that up”. You wouldn’t stand for it! They can’t do it either. Next, you have the tax, title, license, and fees. Let assume that all together this comes to $2,000. That makes 90% of $15,000, $13,500 so your difference is $1,500. You may have guessed that this is a hypothetical scenario and each situation is different.
It is adventitious to save up as much money as you can in order to have the most options and bargaining power when it comes time to go to your dealer. If you have a certain amount that you can put down let your dealer know so that they can help you find the best scenario and the best finance programs for you, right of the bat. If you have little or nothing down it may be more difficult to get the right situation so you’ll need to be more flexible with your vehicle choices. If you want to get a particular vehicle just ask your dealer, how much will I need to put down?
