Down Payment – Don’t Negotiate a Car Deal Without One

It seems like every car dealership is offering ‘no money down’ sales promotions now days. On the surface it sounds great to many buyers (especially inexperienced shoppers). The fact is, there are too many reasons that this is a bad idea and you should try to avoid a ‘no money down’ deal if possible.

The first and most overlooked reason is negotiating power. That’s right, your down payment is a huge advantage to you when fighting for a good deal. Let’s look at some of the reasons:

1. Intent. The dealership knows you are serious about buying. You have either spent a lot of time saving money for this purchase or you are doing better than most people financially. Either way, you are showing up with a clear intent to make a deal and the sales person will not take you for granted. Your negotiating position is strengthened.

2. Ability. Let’s face it, nobody is going to negotiate with someone if they don’t feel the other party can deliver on their side of the deal. You already know that the dealership can sell you a car, this is your chance to show the dealership that you can actually buy a car.

3. Better loan terms. The more you can contribute to the deal in the form of a down payment the more favorable terms you may get. Banks lend money for car loans based on the book value of the vehicle. Lenders do not want the loan amount to exceed a certain percentage of the value (depending on your credit). By borrowing less money from a lender for a new or used vehicle and having an equity position you may be able to get more favorable terms and/or even a better interest rate.

4. More choices. Your ‘debt to income ratio’ (the amount of money you earn vs. the amount you spend) will be the largest factor in determining your maximum loan amount. Since your max loan amount will not change, more money down means you can purchase a more expensive car if you choose. More choices will always give you an advantage in any negotiation.

As with any negotiation, you need to know what information you want to share upfront and what information you want to hold back. This is information you want to share! In a selling environment with so many consumers expecting to buy a vehicle with no ‘skin in the game’ you will stand out. The dealership(s) will fight for your business instead of you begging them for theirs.

This is just a small list of the advantages of having a strong down payment when going car shopping. In a future article we will go further into the financial benefits as well as the recommended amount of money down.

More information available at www.downpayplus.com