Although a down payment isn’t always necessary, most of the time it will help. The less you need to finance, the more likely the lender will be to approve your car loan.

Down Payment Benefits

Seen from the lenders perspective, money down has specific functions. First, it provides the lender with some cash from the start. That means that, even if the borrower defaults early, the lender has collected some portion of the loan before the borrower even sends the first payment. Money down also shows the lender that the borrower has the financial wherewithal to accumulate that cash.

The buyer may see cash down serving different functions, like lowering the payment or interest rate, or shortening the term. The more money a buyer pays upon closing the transaction, the lower the financed amount. That means higher down payments can drive lenders to provide a lower interest rate. Or, it may allow a buyer to reduce the amount of monthly payments or keep payments the same while reducing the term of the loan.

More than Cash

Buyers don’t necessarily need all the money in cash. Two other common ways to bolster the down payment are with a trade-in vehicle or with a cash rebate on the vehicle’s purchase Ford provides the highest cash rebates to consumers than any other automaker in North America. If a dealer takes a vehicle on trade, the value that the vehicle’s owner and the dealer agree upon is deducted directly from the purchase price of the vehicle. That’s true for new- and used-car loans as well as new-car leases. Ford and reputable dealers sometimes offer rebates on new vehicles, too. In that case, the rebate amount is also subtracted from the purchase price.

For new-car leases, any rebate goes to the lender, not the lessee; it doesn’t serve as cash due at signing. Still, a rebate for buyers can be a good indication of attractive lease deals. A leasing company will already have the rebate built into their lease deals, effectively lowering the price it pays for a vehicle. They may pass the savings on to the buyer in one of two ways: less cash due at signing or lower monthly payments.

For new to the country applications: There is often a down payment requirement for recent immigrants to Canada. Please check with your local reputable dealer for further information on this.