Do I Need to Have a Down Payment?
Hearing the promise of no down payments on a new vehicle can give you the push you’ve been looking for to get a new vehicle – but are no down payments a good thing? Do you need to have a down payment in the first place? Understanding down payments, vehicle financing, and vehicle trade-ins can be difficult. We at Friendly Kia want to make the car buying process as easy as possible which is why we’ve put together this helpful financing guide. Keep reading to learn more about automotive down payments and trade-ins.
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What is a Down Payment?
A down payment is the money paid upfront when you are purchasing a vehicle. Down payments are often required by lenders when purchasing new and used vehicles.
Down Payment Pros and Cons
The answer to the question of if you need to have a down payment is no, but there is a catch. There are both positives and negatives to making a down payment when purchasing a vehicle. The upside to down payments is that it can help lower your monthly payments and keep you from paying extra in interest. By keeping your interest down, you are also protected from paying more than what your vehicle is worth in the long run. The larger your down payment, the less you’ll pay month to month.
But what about the downside to down payments? The downside is obvious – you have to pay money upfront and often a good chunk of it. Down payments show lenders that you are committed to paying back the loan they’ve given you and often it is best to pay around 20% down on a new vehicle, or around 10% for a used one. This means that if you’re buying a $20,000 vehicle you can expect to pay around $4,000 in cash at the time of purchase.
So, whether you want to make a down payment or not comes down to your financial situation and the terms of your vehicle purchase.
Trade-Ins: Down Payment Alternative
If your current vehicle is paid off or you have equity on it you can trade it in and use its trade-in value as your down payment. For example, if you are looking to trade in your current vehicle here at Friendly Kia for a new 2020 Kia Soul and we estimate your current vehicle is worth $3,000, you can put that total amount towards your new Soul as a down payment.
Trade-ins are a great way to earn money towards your new vehicle and a great alternative to down payments if you are tight on money. The best route, though, would be to come to the dealership with some down payment money in hand and combine your cash with your vehicle’s trade-in value to make a substantial down payment.
Trade-Ins at Friendly Kia
At Friendly Kia, we are happy to accept trade-ins and we’ll even buy out your lease if you are looking to trade in an older Kia for a new model. With our online trade-in estimator you can get an idea of how much we can offer you for your current vehicle, helping you determine how much money you’ll put down towards your new purchase.
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If you are in the Tampa Bay area and are looking to purchase a new vehicle, head over to the Friendly Kia inventory. If you have any questions about the trade-in process or down payments here at Friendly Kia, contact a member of our financial team today.