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Even if you plan to finance your next car, you may still need to make a down payment on that auto loan.

Let’s face it: Only a fraction of us will ever use cash to buy a car outright. In fact, according to a recent study by Experian, more than 85% of new car purchases were financed last year.

But just because you’re taking out a loan for your next car doesn’t mean that you will walk out the door without paying anything. There’s still your down payment to consider.

A down payment is a partial contribution that you, as the buyer, are expected to make when you finance a purchase. Down payments are typically required to be made in cash, and are commonly requested for auto loans as well as home mortgages.

A down payment is essentially the bank’s way of ensuring that you also have a little skin in the purchase, instead of your lender taking on all of the risk. Depending on how small or large of a down payment you make, though, you also have the ability to impact your auto loan terms and scheduled monthly payments.

There are a few great reasons to fork over a down payment on your new car purchase. Here’s a look at the ones we consider to be most valuable.

1. Better Approval Rate

In some cases, a down payment is unavoidable; there are some lenders who will require you to contribute a certain amount toward your vehicle purchase, even if the rest is being covered by an auto loan. Czytaj więcej →