Topic: U.S. New Car Buyers Not Making a Big Enough Down Payment

[Autos_Editor]

U.S. consumers averaged an 11 percent down payment on new car purchases in 2011, according to Edmunds.com

Read More...

[redman]

Enticing low rates with little incentive for cash purchase and a weak U.S. economy, have a lot to do with this trend.

[Arthur Dent]

If you get offered 0% financing, 0 down why put anything down?

[Jaeger]

If you get offered 0% financing, 0 down why put anything down?

Correct.  You can't do better than free money.  I haven't seen a contemporary 0% deal where it was a condition of sale that you take the car at list price.  I got a healthy discount on my Sonata (slightly better than the APA / CarCostCanada pre-negotiated price) AND zero per cent financing.  If you can earn better than a 0% return on whatever your downpayment would be, over whatever the loan term is, (and if you can't, seek help) then putting money down doesn't make sense.

Jaeger

[Arthur Dent]

I've seen the deal where it is $3k off or 0% for some crazy number of years. I guess you'd have to weight the two. Most often people don't have the whole $30K or whatever they are spending in cash so will go for the 0%. I guess if say you had $20K in cash and got a traditional loan for the remainder you'd end up better off taking the discount.

[redman]

I've seen the deal where it is $3k off or 0% for some crazy number of years. I guess you'd have to weight the two. Most often people don't have the whole $30K or whatever they are spending in cash so will go for the 0%. I guess if say you had $20K in cash and got a traditional loan for the remainder you'd end up better off taking the discount.

I believe dealers now have to show the "effective rate" which is the real rate if "0%" comes with a discounted rate on vehicle price if paid fully.

[Snowman]

If it is truly 0%, then you definitely have a point.

But sometimes 0% means a foregone cash incentive, which is the economic equivalent of interest.  Here, your no downpayment no interest option is not necessarily the better approach.

Agreed, nothing is free.

[tpl]

If you get offered 0% financing, 0 down why put anything down?

Because  you are immediately underwater by somewhere between 10 and 20% as soon as you drive the car away.

Same applies to these 84 month loans at low interest unless you put down a decent deposit....but if you could do that why take such a long loan period anyway.