When you put down a deposit on a car loan, you’re paying a portion of the car’s purchase price upfront. Unsure if you need to pay this or not? Don’t worry; read on. Below we answer some of your frequently asked questions about car loan deposits:
Do you need a deposit for a car loan?
The short answer is no. You could get a car loan for the full price of the vehicle. A deposit for a car loan may become a requirement for extenuating circumstances like if you have bad credit, no credit history at all, or you have negative equity on your current car loan.
Why do people put down a deposit on their car loan?
Even if a deposit isn’t mandatory, a lot of car buyers choose to give a down payment anyway. Paying a deposit on your car loan offers key benefits, the best among them are lowering repayments and saving on interest.
When you put down a deposit, you’re borrowing less money from the lender. This in turn lowers the total interest paid over the life of the loan. You could also lower your repayment amount which makes the monthly, fortnightly, or weekly payments more manageable.
Putting down a deposit could also improve your chances of approval. Having a sizeable deposit shows lenders that you have sufficient savings and good spending habits. Both traits are what lenders look for in a borrower.
What is the disadvantage of paying a deposit?
The downside of paying a deposit on a car loan is more the inconvenience to the borrower than anything else. It may take time for you to save enough money for a deposit. It also ties up your funds to a single purchase instead of being able to spend it on something else.
If you don’t have the time to save up or the funds to spare, getting a car loan without a deposit is still possible. Weigh your options and review your finances carefully to figure out if putting down a deposit is a beneficial.
How much is a deposit for a car loan?
Generally, a 10% deposit for a car loan is considered good. Anything between a 10% and 20% deposit could reduce the cost of your car loan significantly. Remember, the larger the deposit, the lower the overall loan costs.
Any amount of deposit can help lower repayments and lessen the total cost of the loan. If you’re only able to put down a deposit of less than 10%, it will still help you save on interest payments and decrease the repayment amount.
Should you put in a deposit for a car loan?
It depends on your financial situation. It would be great if you could provide a deposit, but you can still get a car loan without it. Figure out what makes the most sense for you financially. Use a car loan repayment calculator to see how a deposit would affect your car loan.
There are cases when it’s advantageous to put down a deposit. If you have bad credit, for example, having a deposit could give you a better chance of approval. Every situation varies though, so it’s best to talk with a lending specialist or car broker to discuss your options.
If you’re looking for a car loan, with a deposit or not, CarLoans.com.au is at your service! Whether you’re buying new or used, we have a range of secured and unsecured car loans for you to choose from.
Let’s discuss your car loan needs so, we can help you find one that’s perfectly tailored to your financial situation. Call 1300 889 669 or get a quote online!