Why Make a Down Payment? Toyota For Sale in Birmingham, AL
What exactly is a down payment? And why do some think it’s a good idea? The term down payment is generally used when buying a big ticket item like a house or a refrigerator or a car. Because it’s a higher price point, it’s likely you are buying it on credit. The down payment is that first payment made when you agree to purchase that item. It may differ from the monthly amount you will owe. So why make a bigger down payment?
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So why make a bigger down payment?
1. Lower Monthly Payment
Nobody wants to have to pay more when it can be avoided. However, there are some distinct advantages to making more than the minimum down payment when financing a new Toyota, car, truck or SUV from Serra Toyota. The easiest way to see how a larger down payment helps is the amount due on the loan each month. In many cases, coming in with more money down will mean paying less each month. Think of it as giving yourself money that you can collect each time you send a check to the financial institution holding the note.
2. Build Equity
Having Equity in your car gives you flexibility. Equity is the difference between the amount owed and the amount it is worth. In general, you are looking to build equity.
3. Minimize depreciation
It's true that a vehicle will lose value over time, this isn't much of a secret. Some people are shocked to learn that the car or truck they bought a year ago is worth about 25 percent less, this doesn't even account for other fees like tax, registration or maintenance. By making a larger down payment an owner can help themselves avoid being "under water" on their loan. Once you factor in finance charges, you may be in a position where your vehicle is worth less than your loan amount, this is called being upside down. Think about how it would play our if your car is stolen or totaled soon after you buy it. Insurance companies will typically pay you for what the vehicle is worth. This money will have to go to the loan. You will be left with little or no money or may even owe money.
4. Save Money
The more money you put down the less money you need to borrow with interest. And, your monthly payments will be lower. So, over the course of the loan you can save money.
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