More Money More Options

The questions I am asked most often are regarding down payment, money down, initial amount, or initial investment.  Most people have taken the opinion that an initial investment is a bad thing or something car dealers do to hurt customers.  Money down shouldn’t be used as a weapon to hurt, but as a tool to help.

It seems to me, that money down would be a helpful tool to help build or rebuild credit. 
Money down has several benefits…Lower payment, lower interest expense, better equity, shorter finance terms, and better loan
protection.

Money down decreases the amount to finance.  The lower the amount to finance means you get a smaller payment.  Often times $1000 invested up front can reduce the monthly amount or payment by $20 or $25 per month.  Not only will money down reduce your payment, it will also reduce your interest expense.  How?

There are three factors that affect interest expense…rate, time, and amount.  Time and amount affect interest expense the most.  Money down will reduce the amount, which will reduce the amount of interest that accumulates over the life of the loan.  You may also be able to shorten the loan term and save yourself tons of money. You may also have a lower rate if you have a shorter loan and better equity.

Your equity position can be affected substantially depending on the amount you are able to bring to the transaction.  20% of the purchase price or better will typically give you equity in the vehicle very quickly…if not immediately (assuming you are not trying to rollover negative equity from a previous loan).

Term of the loan has one of the largest impacts on your total of payments.  Money down could give you the ability to lower you 72 month term to 60 months or 60 months to 48 months.  Shorter terms could save you thousands over the life of the loan.

Money down will give you more flexibility to protect you, the car, and your credit.  Adding products like GAP will protect you credit if the car gets totalled.  Extended service plans will protect your car and your wallet from unexpected repairs.

Money down is one of the most powerful tools to build or rebuild your credit.  It’s not a weapon to limit your options.  The people with the best credit scores typically have the largest initial investment.  Why?  Because they have good credit and they use an initial investment to protect their credit.