Is no down payment financing worth it?

One of the most well-known promotions in the auto loan market are “zero percent down” or “no down payment” offers that involve placing no money down on an auto loan. This is most often seen for new or one-year-old models by auto dealerships looking to push them off the lot quickly. Not paying any money upfront, however, isn’t always the best way to pay for a vehicle.

Here are some things to examine before signing a zero-percent down deal.

Upside – allows for no down payment

Nobody wants to have to pay more money than they have to upfront for a new vehicle that starts to depreciate as soon as you drive it off the dealership lot. An advantage of no down payment is that it allows you to buy a car without having to provide a large amount of money upfront as part of the purchase.

Upside – likely to be a low interest rate

A dealership is taking a big risk on you when you agree to a zero-percent deal. Your credit report is a big part of that deal by providing the confidence, based on your credit history, that you have the ability to pay the loan in full. You more than likely be given a no down payment deal if your credit is good.

Downside – under water immediately

No money down means no equity in the vehicle when you begin making payments on the note. New vehicles lose value almost immediately after purchase so you might owe more than the car is worth for a while, depending on your auto loan.

Downside – bigger payments

A large loan balance means a higher payment, even if you select a longer loan term to spread out the payments. Even a small down payment of a few thousand dollars can help lower your monthly auto loan payments.

Remember, as good as it sounds, consider the advantages and disadvantages of a no down payment option before signing your name to the deal.

Protection against the unexpected

Protect your auto loan from the unexpected with our Guaranteed Asset Protection (GAP) insurance plan. GAP pays the difference between what your vehicle is valued at by your insurance provider and what you owe on your loan, in the event your vehicle is totaled in an accident. For more information, visit

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