Have Your Down Payment Ready Before You Buy a New Car

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It works even better with used cars

If a large down payment is a major advantage in the purchase of a new car, it’s even more powerful if you’re buying a used car. The impact of a large down payment is magnified with the purchase of a lower priced vehicle.

By way of example, let’s say you’re buying a new car for $30,000 and you’ve managed to sell your old car to a private party for $10,000. You’ll have what amounts to a 33% down payment for the new car, which is more than most people put down.

But let’s say that instead you decide to purchase a used car for $15,000—now you’re putting down 67%! And you’ll only need a $5000 loan to complete the purchase—that’s less than what a lot of people owe on a single credit card! Do you think that will improve your bargaining position with the dealer?

Assembling the funds

For most car purchases the funds for the down payment come primarily or entirely from the trade-in of an existing vehicle. If you have a car now, this is the obvious source of funds, but in doing so be sure that you’re getting the best value for your equity.

Before doing anything else, go to a car valuation site like Kelly Blue Book to get a clear idea of what your vehicle is worth. It can give you a pretty accurate idea of what your specific vehicle is worth based on the year, make, model, options and market area. If you at least know the value of your car, you’re in a far better position to maximize the cash value you will get for it.

Selling the car yourself directly to another party will offer you the best chance of getting the highest price for the car. If you’re pretty sure you’ll soon be in the market for a new car, try selling it through Craigslist, giving yourself at least 30 days to market it. Once the buyers check clears your bank, you’ll be ready to go to a car dealer and start wheeling and dealing, cash in hand.

If you have no luck selling to another person, Carmax buys cars even if you don’t buy from them. They’ll inspect the car and give you a written offer that will be good for seven days. This will provide you with a window in which you can be negotiating with another dealer for a trade-in. If the Carmax offer is better than the trade-in allowance from the dealer, you can either negotiate a higher value with the car dealer, or go ahead and complete the sale to Carmax.

At a minimum, the Carmax offer will let you know if the dealer offer on your trade-in is a good one.

You’ve heard the term “cash is king”—no where is that more true than in a car dealership. The more of it you have, the better the deal you’re likely to walk out with.

Have you ever accepted a trade-in allowance from a dealership, only to realize or discover later that you could have gotten more money for your old car?

( Photo courtesy of emilio labrador )

Article courtesy of Kevin Mercadante with OutOfYourRut.com