What amount should be set aside for a car loan down payment?

You may be wondering whether a deposit is necessary and what percentage of the total loan amount it should be given because of the multitude of costs and fees related to a car loan.

What justification exists for a deposit?

Your agreement to pay a portion of the purchase price in advance on your auto loan, known as a deposit, lowers the total amount of the loan that still has to be repaid.

Your saving practices, which are seen favourably by lenders and banks, can also be shown through your deposits. By putting down a deposit, you lower the risk for lenders, who could then reward you with more enticing interest rates on your auto loan.

A deposit is not always required when it comes to auto loans. While some lenders may require a deposit, others can approve a loan without one, allowing you to borrow the full value of the vehicle. Poor credit, an outstanding vehicle loan, or particular lender deposit rules are examples of situations when a lender might require a deposit.

Lenders are going to evaluate your income, obligations, and outgoings when you apply for a car loan in order to determine how a loan might affect your budget because loan repayments should be in line with your financial capacity.

car loan payment

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Is a deposit required?

Saving money for a deposit is not always necessary; the choice to have one is ultimately up to you. The majority of banks and lenders may approve a loan paying the full value of the car. Enquire about the requirement for a deposit for your specific loan when speaking with a finance professional about your auto loan.

If a deposit is necessary for your auto loan, the amount may depend on your ability to pay or other conditions imposed by the lender.

The typical down payment for a car loan might be between 10% and 20%. While any amount can significantly reduce your repayment and interest rates, aiming for a 20% deposit can be advantageous. A 20% deposit, though, can be out of reach for many people, especially if they suddenly find themselves in need of a new car.

Even when it’s not required, choosing to make a deposit can lower your overall payment. If you have bad credit, a greater down payment might increase the likelihood that your loan will be approved and provide you a better rate.

Despite a deposit not always being required, it can speed up loan approval and give you more control over how you manage your repayments. The advantages of making a deposit on your auto loan are numerous.

Gains from a deposit

The main benefit of a deposit is that it can reduce the size of your repayments, making them easier to manage. There will be less to repay if your deposit is higher because your loan would be smaller. Additionally, this results in a decrease in total interest paid and can shorten the length of the loan.

Your chances of being approved may increase if you have a saved deposit because it makes you seem more credible to lenders. Your capacity to save a deposit may be seen by lenders as a sign that you are more likely to repay your loan. Additionally, making a deposit can result in a loan with a cheaper interest rate, which would result in significant long-term savings.

Saving up a deposit, if you can, can be very advantageous. However, there are possibilities with lenders who don’t require a deposit if you need a car right away.

The choice of making a deposit frequently depends on your particular financial situation. Although it can take some time to save for a deposit and isn’t necessarily necessary for a car loan, doing so could result in significant savings on your loan.

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Consider these 5 steps before your next finance application

Do you intend to purchase an asset using financing? Before plunging in, take a few steps to ensure that you are well-informed and capable of making a decision. At Verified Lending, we specialize in tailoring asset finance solutions to meet your specific requirements. The following 5 steps  are critical in the lead up to submitting a finance application; 

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Step 1: Recognise your credit score

Cedit Score

Your credit score plays a big role in the loan application process in general, but especially in asset financing. Verified Lending suggests that you check your credit score for free online before applying for finance. This will enable you to evaluate your current credit situation and identify any issues that require correction. By taking steps to improve your credit score, such as making on-time bill payments and refraining from making excessive credit card charges, you can increase your chances of being approved for financing.

Step 2: Understanding the “ins and outs”

in and out of money

Asset finance is not a one-size-fits-all product, so it is crucial to consider your end goal before submitting an application for financing. Verified Lending encourages its customers to list important and desirable things like being able to make extra payments, add insurance or a warranty, and more. By doing this, you’ll be able to better understand what you want from your loan.

Step 3: Why use a finance broker?

finance broker

Among other options, you can finance an asset through a dealer, your bank, or a finance broker. Verified Lending advises using a finance broker for a number of reasons. First off, it saves you time and effort by comparing financial products on your behalf. They have access to a variety of lenders and loans, meaning your finance broker will provide you with more options. Finally, because they have in-depth knowledge of the industry, finance brokers can help you find the financing option that will best suit your needs.

Step 4: Obtain your pre-approval 


When looking to buy an asset, getting pre-approval for financing is a great place to start. So that you are fully aware of your financial capabilities, Verified Lending can help you get a pre-approval for financing. This will enable you to focus on selecting the ideal asset within your price range and make the car-buying process much easier.

Step 5: The “Do’s and Don’ts”.

Do's and Don'ts

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It is essential to compare loan products and interest rates prior to selecting a financing option. Verified Lending offers access to a wide range of lenders and loan products, ensuring that you secure a favorable deal. It is crucial to note that every credit inquiry leaves a mark on your credit report, emphasizing the importance of limiting such inquiries. To minimize the number of inquiries made, Verified Lending follows a ‘soft touch’ approach by thoroughly reviewing your application before submitting it to our lenders.

At Verified Lending, we’re committed to helping our clients find the best asset finance options. If you need help financing your next asset, call (02) 7503 2790 or  [email protected]  or just simply fill our contact form