Q: How much should a down payment be?
A: Generally speaking, a down payment should come to around 10 to 20 percent of the vehicle’s total cost. Down payment percentages vary from dealership to dealership. Some sellers even offer vehicles with no down payment but, as a result, the monthly payments will be much higher over the course of the average loan period.
Q: What determines how much a monthly payment is?
A: Your monthly payment is a result of the total purchase price minus the down payment. From there, a lender, whether a dealership or another financial institution, finances the rest of the price and charges an annual percentage rate for use of the money.
The annual percentage rate adds to the initial amount financed, known as the principal. As a result, buyers will often pay a little more over the course of a loan. Generally speaking, the average loan is five years.
Q: What happens after the loan is paid in full?
A: For starters, you now officially own the car. When a loan is paid in full, the financial institution transfers the title to you. From there, you can resell the vehicle without losing equity.