When looking at purchasing a car, one of the first decisions you’ll need to make is – Should I buy a new car? Or, should I buy a used car? Although there are numerous benefits to purchasing new, for car buyers with a limited budget, the low down payment on a used car usually is an advantage that’s hard to ignore.
Lower Price = A Low Down Payment
One of the reasons why used cars offer a low down payment is the lower price. For most cars, as they age, they depreciate in value. This means, a car that’s only a couple of years old, can cost thousands of dollars less than it did when it was new. A lower overall price tag will mean you have a lower down payment.
A used car’s lower price tag and low down payment means you get more bang for your car buying buck, especially for late model, low mileage vehicles. In today’s economy, more value for your hard-earned money is important to most car buyers. Not only will you be minimizing the amount of money you have to hand over at the time of purchase, but your monthly payment will be lower, and/or your loan term will be shorter, with a used car compared to a new car.
More Equity = A Low Down Payment
When getting an auto loan, your financing company will look at a variety of facets, when determining whether or not to funding your loan. Your credit history, your income, the amount of loan you want for the car, and the value of the car, all come into play. With new cars, oftentimes they depreciate significantly the moment you drive them off the lot. Therefore many times a low down payment simply isn’t an option, for a new car.
However, on used vehicles, where you have a higher percentage of equity at the time of purchase, your bank may require a lower down payment. Banks know the value of the used car you’re buying isn’t going to change as soon as you drive it home, so feel more comfortable accepting a low down payment. In fact, get a good enough deal on your used car, and you may actually have enough equity in the vehicle that, combined with a good credit score, your bank may not require a down payment at all.
Maybe the balancing act for many new and used car buyers is almost over: there are signs that US auto loan delinquencies are down. For a while there, many car buyers were making their monthly car payments late, well after the due date. Some of these customers even went into default on their new or used car loans. Between high unemployment rates and rising prices for gasoline, health care and groceries, they just didn’t have the cash to pay all their bills on time.
Now, though, things are getting a little better. The economy is showing signs of life around the country. Fuel prices have stabilized a little. The crushing unemployment rate we’ve suffered through during the past three years is slightly better. And, for the first time in many long months, residential property values are showing signs they’re beginning to rise. Maybe we’re starting to see the light at the end of the tunnel for this long, nasty downturn in the economy. That’s good news for everyone.
Now, a higher percentage of car dealership customers are paying their new and used car loans on time. When property values and employment rates are up and auto loan delinquencies are down, the public has more confidence in the economy. With a stronger economy, a lot more people become willing to spend their hard-earned cash on the things they want and need, including expensive items like vehicles. Many of those people will be buying new and used cars from dealerships around the country.
Without a doubt, most Americans have been feeling some financial pain over the past few years. Some have been struggling more than others, but quite a large number of people have actually been in dire financial straits. The economy has been slow to come out of its downturn, and a lot of people have been finding it hard to keep their homes, pay their bills, and put food on the table at the same time. Jobs have been hard to find and hard to keep.
All that adds up to a sorry fact: more often than ever before, many Americans have been late on at least some of their car loan payments, even to the point of being in outright default. It’s been a sad state of affairs for many of the country’s new and used car buyers. They need a vehicle to get back and forth to work, but they can’t afford to keep their home mortgage payments current, pay the high costs of health care and health care insurance, buy groceries, pay for the clothing and shoes their family needs, and make their car loan payments on top of everything else. So, they’ve been putting off what they can, and some have been “robbing Peter to pay Paul.”