Have Your Down Payment Ready Before You Buy a New Car

By Kevin M

Last week we talked about the importance of having your financing ready before going to a car dealer. Today I want to cover another form of advanced preparation that’s equally important—having your down payment in place.

When ever we go into a car dealership—or any business—a series of negations begins. While we might want to believe that buying a car is a single transaction, it’s really a composition of several sub-transactions, including obtaining financing (if necessary), negotiating options or setting a value on your trade-in.

The best chance we have at getting a good deal on the overall purchase then, is to handle as much of the deal before we get to the dealers store—and without his help!

Control as much of the transaction as you can

Yes, it is a lot easier to simply accept a dealers trade-in allowance, but you can pay a high price for that convenience—at least hundreds, and maybe thousands of dollars. The dealership isn’t selling you a car to be a good business citizen—they’re trying to make as much money as they can. As a matter of self-interest, your job is to deny them that opportunity!

Relying on the dealer to supply a big chunk of your up front cash is giving him control of your finances. He will set the value of your current vehicle and how much cash he will “allow” you to bring to the table. It is, after all, a trade-in allowance, and not cash in the true sense.

Walking in the door with a checking account full of cash that you procured without the dealers help will give you more control and bargaining power than you’ll ever get by taking advantage of a trade-in allowance. The more of the transaction you can handle on your own, the more control you bring to the table.

The bigger the down payment, the better the deal

For starters, having a large down payment makes you less dependent on financing, and that makes you a stronger buyer. For another, the more you put down, the better the loan terms are likely to be. Finally, in a cash-starved, debt-drenched world, a large cash position commands respect. It’s an indication that you’re in control of your finances and less reliant on any self-styled experts to make your way in life.

Keeping that in mind, consider making the largest down payment you can, even if that means adding some outside savings to the funds from the sale or trade-in of your car. The more you can put down, the stronger your bargaining position