Down Payment Options for New and Used Vehicles

Once upon a time, there was a generally accepted rule of thumb for down payments: 20% down on your new vehicle, no matter what. These days that rule has changed quite a bit, and the market for used vehicles has only grown stronger since the era of the 20% rule. At Thompson Sales, we accept a wide variety of down payments. Read on to learn more about what to expect when planning your down payment for new vehicles or pre-owned models.

Different Types of Down Payments

Most car dealerships in Springfield, MO, will accept a range of down payment options, including the traditional 20%. This goes for both new and pre-owned vehicles. At Thompson Sales, for instance, we accept all different percentages of down payments, once the buyer has qualified for the loan. Some people pay no down payment on their new vehicles, other people pay as much as 25%, and we see everything in between. 

Benefits of Putting 20% Down

20% down payments were rule of thumb for both new and used vehicles for a few reasons. The larger down payment helped lower car owners’ monthly payments. A new car depreciates in value by a large margin in the first year. The large down payment helps protect the buyer from this depreciation in case of an accident.

If you put less down, there is a chance you could get into an accident and owe the bank more than what the car is worth, according to your insurance policy and the value of your vehicle. A larger down payment can also decrease your interest rate for the car loan. Having a trade-in can add to your down payment amount, lessening the amount of money you’ll need to save.

Benefits of Paying a Smaller Sum

Whether you’re buying a new or used vehicle, there is often a trade-off between a low interest rate and a low down payment. The lower your down payment, the higher your interest rate is likely to be.

If you have good credit and can qualify for a low APR, you’re better positioned to make a lower down payment. Used vehicles tend to have higher interest rates, but a lower overall price. So it makes sense to put a solid down payment on your used car to leverage a lower interest rate. 

Used Vehicles vs. New Vehicles

Used cars are cheaper to begin with, so it’s easier to save enough to put 20% down. Their interest rates are higher, and that’s more incentive to put more down up front. On the other hand, used vehicles tend to depreciate less than new cars, so you won’t owe as much if something were to happen to your vehicle in the first couple of years. 

Saving 20% for a new car might not seem as attractive as for a new vehicle. New car interest rates are already quite a bit lower than those for used cars. The biggest reason to put more down is to make sure you always owe the bank less money than the car is currently worth.

Check Out Thompson Sales Today

At Thompson Sales, we have a wide variety of used and new vehicles to choose from. If you’re looking for a GMC, Buick, or Cadillac in Springfield, MO, make sure to add Thompson Sales to your list of places to visit while surfing the web. If you feel like reaching out, feel free to contact us or call at (417) 763-6811.