When considering the purchase of a new car, a concern for many buyers is how much will be needed for a down payment. And, for potential borrowers with damaged credit, this can be enough for them to stop their search before they even start.
The concept of a down payment is pretty straightforward - it is money from the buyer to put towards the purchase in order to show the lender that they are committed to repaying the loan. It also allows the buyer to build equity in the vehicle, as well as lower the monthly payment. Most experts recommend having 20% of the vehicle's value saved up to put towards the purchase. However, lenders typically don't require buyers to have that amount.
But when you have damaged credit, a down payment is important as the lender will want more reassurance that you will not default on the loan.
What If I Don't Have Money for a Vehicle Down Payment?
If you are having trouble raising a significant down payment to put towards your car purchase, there are lenders that specialize in unique financial situations who will work with you. These lenders may be able to approve you for zero down financing as long as you have enough to cover tax, title and license fees (TTL). If you are able to cover these costs, lenders are more likely to approve you for a loan as they usually don't like to lend above the value of the car itself.
Also keep in mind that your current vehicle may still be of value. As long as you have equity in it, that can be used as a down payment towards the new one. Even if you are still making payments on your current vehicle, that equity can still be used.
Find the Dealer That Works for You
When it comes down to it, you just need to find the right dealer - one that works with lenders who are qualified to work with buyers that have credit issues. At Canada Auto Loan, we help car buyers get connected to the dealers that can help them get approved. We can do the same for you. All you need to do is complete our fast, easy and secure online application. From there, we will match you with a dealer that has the resources to get you back on the road fast.