Overhaulin'

If a car loan rate is 3.9%, does it make sense to put any money down, aside from lowering monthly payments?

Ok, here's more. I keep cars forever, so I'll have it long after the loan is up. I'll probably get Gap Ins. And what about inflation? If I keep the money in the bank, rather than a down pmt, how does inflation factor in to the equation with such a low int rate?

Public Comments

1. Nope
2. You should always put money down on a car loan. Then you can avoid being "upside down" if you decide to trade the car before the end of the term of the loan
3. Yes, anything will help if you can afford it.
4. YES! Do you want to pay money to the bank on interest or would you rather keep that money in your bank account gaining interest for you? 3.9% is a great rate but you should put some money down as well. Another reason - if you ever get in an accident and total your car or the car is stolen and is not recovered, you will get a check for the car's book value and NOT the amount owed on the loan. If you finance 100% of the car, you'll have what's called a "gap" in coverage for the length of your loan. You can buy gap coverage for around $300 or $400. If you put money down, you may not need this insurance because the value of the car will be higher than what you owe on the car plus interest. I would say you should put money down on the car. The only loan rate that I would say not to is if they give you 0% financing.
5. Not as long as your money makes more than that in the bank. Especailly if you can get approved with nothing down and qualify for that rate.... Sounds like a Honda Rate, unless Im mistaken?? Chris To Top Gun - How can you say say its not a real rate? We have a 3.9% rate going for some Certified Used Hondas right now, not to mention other specials that are nationally going on...(Feel free to check the Honda Website) and we cant do Buy Downs as of the 1st of January... So dont state things in that context unless you know that what you are stating is fact, rather than opinion! Chris
6. No. 1st the 3.9 is not a real rate but the dealer buys down rate with profit as a form of discount. Paying off your vehicle early like double payments are great due to the fact that all extra goes to equity. Putting money aside will do nothing except collect dust as far as car is concearned. Putting money down is up to you and your budget.
7. Depends. Are you forfeiting a rebate to take the rate, or do you get to capture both special rate and rebate? Can you earn than 3.9% use of your money if you keep it in your bank/fund account? What is it worth, in todays uncertain economy, to have cash available and be "liquid". I would put small amount down to keep a low payment but only up to 20%. It can also benefit you to have a little "equity" in the vehicle for the bank approval.