Valley Auto Loans specializes in finding you an auto loan with no down payment that will fit your needs. If a zero down car loan is what you are looking for, we can match you with a lender who can give you an affordable interest rate even if you have bad credit. Using a loan broker means your application is reviewed by many of our lenders so you are matched to a lender that is willing to meet your needs. You are offered the best auto loan terms for your request without having your credit checked over and over by different companies.
Our Application Process
- Fill out an application online and enter the amount you desire for a down payment
- Your application is reviewed by lenders who fit your requirements, and they respond back directly to you with a loan offer
- You can review the loan offer and decide if you like the terms of the offer. There is no obligation to accept the offer.
- We have 100% application acceptance, and we never charge an application fee.
- Most of our lenders base your loan on your ability to pay the loan back and do not rely on just your credit score. This allows us to have a higher success rate in finding you the best auto loan for your situation.
Zero Down Car Loan Advantages
- 1 Our Application Process
- 2 Zero Down Car Loan Advantages
- 3 Zero Down Car Dealer Disadvantages
- 4 How Do Zero Down Auto Loans Work?
- 5 Zero Down Car Financing Lenders
- 6 Tips For Choosing The Best Loan
- 7 The Dealer’s Marketing Ploy
- 8 No Down Payment Auto Loans: The Bottom Line
The first advantage a person thinks of when looking at a Zero Down Car Loan is that they will not have to put up any money to get a new car. This has some truth to it if you qualify, but the fact is that most who qualify for a zero down car loan could afford a down payment if they save some money over time. Those who cannot, probably won’t qualify for the better rates, but you could still get a loan without the down payment. Many who apply for a no money down car loan find themselves in need of a car as soon as possible and don’t have time to save up a down payment. With a zero money down automobile loan, the down payment one would typically pay is instead structured into the car loan, so it seems to be more expensive over time.
Other types of the dealer offered no down payment car loans are through “trade equity” and “vehicle rebates” (new automobiles).
- Trade equity can only be used if the customer has a vehicle of some value to trade in.
- The price of the car can be put towards a down payment. If the car is not worth the entire down payment, the dealer will show the full amount needed and roll the remainder into the car loan.
- Apply rebates to the loan.
Reduce The Loan Amount
The dealer will apply dealer or customer rebates to the 0 down payment car loan as a down payment to reduce the amount of the loan. A fact of nature is that a new car loses 20% to 25% of its value practically the minute you drive the vehicle off the lot. 1 If the no money down car loan was for the full price of the car, the customer would be paying for a loan that is 20% to 25% more than the value of the car. With a down payment, either from a trade-in or cash-back, the amount of the loan is more in line with the actual value of the car.
Zero Down Car Dealer Disadvantages
The above doesn’t seem so bad, in fact, it seems like a good deal if you need a car fast. However, there are 0 down cars offered at car dealer lots that can cost the buyer much more in the long run.
Many people do not understand the intricacies of interest rates and their impact on a zero down car financing loan. The car dealer scams presented to you when working on the funding with a car dealership do not seem to be car scams at all. Unfortunately, car dealers may take advantage of this ignorance. The zero down car dealers will convince the buyer that driving a car off the lot in exchange for nothing is a magnificent deal. People can get the impression that no money down cars from dealers are easier to get, and all they have to do is qualify for financing.
Value Of No Down Payment Cars Can Fall Fast
Without making a down payment, the buyer may take three years just to cut the loan in half. If you make a down payment up front, the amount owed in three years can be significantly reduced and, often, the loan can be completely repaid in a little more than three years. An easy way to estimate your costs for your loan is to use an auto loan payoff calculator. This will show you your payments with no money down or how your payments will change over the term of the loan by putting up a small down payment. For college students, that can mean the difference of having the car loan to pay back as well as the school loan a the end of three years. The higher the interest rate, the longer it will take to repay the loan. This is because the monthly payments are going towards the interest on the loan and not the principal. If the principal is not paid down, this can go on for years.
0 Down Cars From Dealer Car Lots: Overview
No down payment car advertisements on the television, the internet, radio, and newspapers promise consumers that they can get a new car with zero down payment or no money down. “The chance to purchase a no down payment car is what they need.” Many people understand that financing a car will require a down payment.
Many individuals with bad credit find themselves in need of a car, that didn’t plan to be car shopping. Their old car breaks down and can’t be fixed or will cost more than it is worth. There are many who are buying a car for the first time and need a car to get to a new job and no money down car loans will save them from having to come up with a down payment. Americans simply don’t have that much money in liquid assets, and they do not have the money for a down payment and need transportation. For this reason, many people find themselves going to Bad Credit No Money Down Car Dealerships. They need the option of zero down used cars. 0 down cars sound great, at first, because down payments are usually 15%-20% of the price of the car.
According to Edmunds.com, conventional wisdom is that 20 percent is what many financial advisers recommend as a down payment when purchasing a vehicle. This may not be possible for everyone with bad credit yet, most buyers who put up a down payment is at an average of 12 percent. However, there are some things to consider before jumping into a quote on a 0 down payment car loan and we want you to have a better understanding of how an approved zero down car loan looks over the life of your car loan.
Before you start shopping for your next car you should check out our “New Car Buying Guide” that will help you recognize dealer scams and will help you negotiate the best price with a car dealer.
According to Bankrate, the average cost of a new car in the United States is $32,086. This means that for a buyer to put a down payment of 20 percent on a new car, they would need to have cash-on-hand in the amount of $6,417, an amount that the average consumer may not have on hand. With this in mind, many people will look for a 0 down payment car loan or may request a minimum down payment on the car and finance the balance. There are some tips, however, for avoiding a high monthly payment, when you give the best down payment you can even with a smaller down payment.
I Cannot Afford A Down Payment
In recent years, new vehicle costs rose by an average of just over one percent for the fifth consecutive year after declining between 1998 and 2008 2. However, many Americans are finding that their paychecks are not increasing to match the rising price of new cars. This improves cars purchased with no money down car loans.
As of October 2014, salaries had risen just over two percent over the past year, only slightly ahead of inflation. This leaves tiny room in the average budget to put 20 percent down on a new vehicle. You might decide to pay the bare minimum down payment or seek zero down payment car financing.
Our auto loan application allows you to enter the amount you would like to use as a down payment from 0 to what you think you can afford. The lender will see this when they review your application and will take that into consideration when making you a loan offer. That way you are matched with a lender that fits your needs. Remember that a bad credit auto loan lender looks at your job history and income above your credit score so fill out the application as accurately as possible to improve your chances of a better interest rate. Lenders tend to accept higher risk loans at the beginning of each month to fill their loan quota for that month. Applying at the start of a month may improve your chances of getting a better loan if you have a lower credit score.
How Do Zero Down Auto Loans Work?
0 down payment car dealers may advertise used cars, then ask to show a down payment on the loan. Without actually committing false advertising, the car dealer may request the customer to make a small down payment to buy a vehicle. This is because the financing is done through a third-party bank or lender, and they require a down payment. However, car dealers have figured out ways 3 that customers don’t have to come up with the cash to make a down payment, which is why they can boldly say, zero down car loans.
0 Down Cars & Trade-Ins
Even though the person did not have to come up with the cash, they did have to use the value of their trade-in. When the dealer advertises that they offer zero down car financing, it may be legal, and is a great pull to bring in customers, but, in this case, it is not true.
This is also called being Under Water or negative equity. Many times, with 0 down car loans, the amount the buyer owes on their car loan after paying for two or three years is more than the car is actually worth.
If a down payment were given at the beginning, the buyer could often sell the vehicle for a price that will pay off the loan. In the case of zero down auto loans, this is often not the case. The car may be falling apart, but the owner cannot afford to give it up, and all the while they are still making payments on their ‘fantastic’ zero down payment car loan. If making a down payment of any kind is out of the question, a good lease agreement is far better than this type of debt spiral. Many zero down car deals are made for convenience. An impulse decision to purchase a car without planning ahead can lead someone into cars with no down payment because they have not taken the time to put together a good down payment.
Zero Down Car Financing Lenders
Companies that finance auto loans consider no money down car loans riskier than loans where the buyer paid a down payment. This is because the buyer has invested money in the car and is more likely to keep up the monthly payments and, finally, repay the loan. Statistics show that buyers who choose zero down auto loans are more likely to default on the loan in the end. Default is bad enough, but the car will probably be worth less than the amount of loan that is left.
In fact, it is a small percent of people with bad credit scores who most need 0 down car loans, and they are the very ones who could have trouble repaying the loan. Lenders may give the loan, but the interest rate could be very high. The cost of the car will also be taken into consideration. If the price is greater than the value of the car, lenders will most likely not give the loan because if the buyer defaults, the lender is stuck with a valueless car.
Tips For Choosing The Best Loan
Before deciding to purchase a 0 down payment car loan, it is critical to understand your financial situation. The first step is to check your credit report to be sure you qualify for a car loan. If your credit is less than perfect, you can still obtain financing although your interest rate may be higher than someone with perfect credit. It may be harder to get financing with poor credit if you do not have a down payment. Buying a car with bad credit and no money down can be a challenge if you do not know where to look. Valley Auto Loans uses lenders who in specialize in auto loans for people with subprime credit scores. These lenders look closer at the applicant’s ability to pay back the loan with a steady job and not rely on the credit score for the determining factor.
We do recommend, correcting any problems on your credit report before going shopping for a new vehicle is strongly advised. You will also need to provide proof of income and address to the lender when you apply for the loan, so be sure to have that information available and take the right steps to reconstruct your credit score.
Sell Your Old Car
If you have an old car that you are considering trading in to purchase a new one, it is often better financially if you sell the car yourself, especially if the car is in excellent condition with low mileage. However, if your car has mechanical problems or is in poor condition, it may be difficult to sell. In that case, it is better to trade in your current vehicle at the dealer to lower your down payment when financing.
Keep in mind that no matter what condition the vehicle is in, the dealer will offer less than the trade-in value. You will need to factor that in when determining how much you will have for a down payment if part of that down payment is the trade-in.
Lower Monthly Costs
You should try to give a decent down payment to lower your monthly payments. However, what many consumers do not know is that a lender can do a number of things to get the monthly payment where you need it to be to fit your budget, so you don’t have to write a down payment check.
If your credit rating is high enough, they can lower the interest rate, or they can offer a longer term of the loan, allowing you to pay for six years rather than five, for example. Therefore, other options are available if you do not have a large down payment or would prefer not putting a large sum down on a vehicle initially. This can also be offered if you are simply refinancing your car for lower payments. Use our loan payment calculator to help find the best monthly payments and what size down payment is best for you.
During certain times of the year, many auto manufacturers and dealers offer cash rebates on specific vehicle models to boost sales. A cash rebate is a good way to put a down payment on a car without having to take money out of your pocket. Some dealers even offer discounts on new car leases as well, but they do not serve as cash on signing or a down payment. In those cases, the money often goes to the dealer who then applies the rebate as a lower down payment or a lower monthly payment on the lease.
- Some dealers will not tell you about the rebates but use them in the negotiating price that you may find out later at the signing so ask about them during price negotiating.
- Also, check to see if the car you are considering is eligible for tax credits for alternative fuel or electric vehicles.
- The tax incentives could easily pay back the money you use for your down payment, so it is like not having to lose the cash down payment you came up with.
Financial Company Benefits
Financial companies prefer down payments as it provides them with cash at the beginning of the loan so that if the buyer defaults, they still have money collected. A down payment also offsets the instant depreciation on a new car so that if there is an accident or if the buyer defaults, the finance company does not suffer as great a loss. No money down car loans cost more. This is why many lenders offer lower interest rates to subprime credit buyers who provide higher down payments as it indicates a customer who is more likely to make payments regularly and on time than one who does not.
Beware of Dealer Financing
Whether you decide to put a down payment on a vehicle or trade one in, it is important to review all documents placed in front of you by the dealer.
Many times, buyers only focus on the purchase price of the car. Zero down auto loans leads people to believe they get the car for less.
- If you are financing the automobile through a dealer-based finance company, check all documents to be sure you are getting the right interest rate and that all deductions entered correctly. If you are using a trade-in as a down payment, check to be sure that the amount quoted you on your trade is the amount entered on all financial documents. Some dealers will enter a lower amount on records than they tell you.
- Ask about taxes and licenses fees as well, they could raise the cost of the vehicle. Consider negotiating the price of the car and leaving the dealership before discussing the financing to broker an even better deal. Again, if possible, arrange to finance before going to the dealer to eliminate deceptive practices or in-house auto loans, when you are purchasing the vehicle.
- Buying a new car is exciting, but it is important to understand the many aspects of financing the vehicle as well. Although a down payment can reduce your monthly payments and may be required if your credit is poor, not every lender or dealer requires down payments in order for those of high risk to qualify to finance a vehicle.
- Consider obtaining financing prior to arrival at the dealership to make the car buying experience even less stressful.
The Dealer’s Marketing Ploy
Car dealers need to sell cars, and they will use every means to do so. 4 This means that they attract customers with their advertising of cars with zero down payments. Then they get them attached to a particular car or model through test drives and sales pitches. By the time the buyer is in the office talking about payment, they realize that zero down car loans will not work for them. The dealer is hoping that the consumer is so attached to the car that they will not walk away. The main buying topic the dealer is pointing out may be the size of the monthly payment and not the interest rate or the total cost. Zero down cars are only a good deal if the total cost of all the payments represents the total value of the car to you.
Also, the credit score of the buyer plays a big part. Low-interest rates are only given to people who have a high credit score. This is where the customer gets stuck. They are attracted to the vehicle, the no down payment car loan and have no idea of the serious trouble they are walking into with the interest rate. Statistics show that one out of ten buyers just goes with the offer given by the no down payment car dealerships and their zero down auto loans.
So what have we learned? Putting as big a down payment on an auto loan as possible is the best option for reducing the cost of the car over the dealer who does not require one. In fact, any down payment is better than zero. If you have never been on a budget before, these concepts may seem very different to you. In any case, buyers should beware and go to the dealership with at least a little understanding of interest rates and the final cost of the loan.
If you find yourself struggling to come up with a down payment you should consider setting up a “simple budget” to help you get that down payment for a car from money you didn’t know you had. Our resource page can also offer you other helpful information that can get you out of a dangerous situation and save you some money. We can show you how to get better gas mileage than you are getting with your present car. You can also learn how to jump start a car with jumper cables if you have never done it. There is a page on how to repair a tire with a plug kit you can get at any auto parts store or change your own wiper blades. We do much more than just give financial advice and find people excellent auto loans, so check out the tools available.
Sometimes financing a car with no money down is the only option for some people, but making sure you are informed about the difference between 0 down car loans and a small down payment could help you make the right decision. Valley Auto Loans can help you find the best auto loan for you. We offer safe no money down auto loans for those who need it, and most of our loans are designed to repair your credit as well as get you into a new car.
If you have no choice, and a zero down car loan puts you in a high payment situation, Valley Auto Loans can be the best company to refinance your car loan after your credit improves in time. You can fill out an auto refinance application online with no cost or obligation. You can also check out the Blog and Resources pages to help you make an informed decision for your 0 down payment car loan today.
Sources and Citations:
- http://www.carsdirect.com/used-car-prices/why-does-a-new-car-lose-value-after-its-driven-off-the-lot ↩
- http://247wallst.com/autos/2014/04/15/are-rising-car-prices-a-good-thing-for-the-economy/ ↩
- http://www.businessinsider.com/21-car-buying-scams-and-how-to-avoid-them-2012-10 ↩
- http://www.alternet.org/economy/8-ways-used-car-dealers-can-swindle-you ↩