Can I Still Sign for a Finance Deal if I Don't Have the Full Down Payment?

Introduction

If you're approved for a car loan but can't cover the entire down payment, you might be wondering if it's possible to still sign for the deal. This article will explore the options available and the considerations you should keep in mind before making a decision.

Financing with an Incomplete Down Payment

Many dealerships allow for partial down payments, often up to a grand or two short of the required minimum, such as $3,000. Most lenders will still approve the loan with the smaller down payment. However, such agreements are usually temporary and require that the difference be paid off within a certain timeframe, such as one to two months. Before committing, ensure you can make the agreed-upon payments.

Partial Down Payment Example

Suppose you have $2,500 in cash but need $3,000. If the lender is willing to approve the loan with a $2,500 down payment, the dealership's finance manager can contact the lender for a favor to make the deal possible. Once the down payment is made, you can take your new ride.

Dealership Willingness to Wait

Dealerships generally don’t hold onto cars just because the down payment is incomplete. It's uncommon for a dealership to wait for the full down payment, especially if the car is close to selling. Dealerships want to sell vehicles now, not later. The faster a vehicle is sold, the lower the holding costs and potential risks of damage or theft.

Turnover Speed is the Goal

The approval for the loan usually has a finite shelf life, typically around 15 days. During this time, the finance company gives the dealership some time to arrange the deal. However, the deal on the car from the dealership may still be removed at any time. When you sign a contract specifying you have put a certain amount down, you need to have that down payment in hand immediately or soon enough to comply with the terms.

Alternative Options

Dealerships often work hard to get you financed, even if it's not in your best financial interests. This should serve as a sign that financing a car may not be wise. Instead, consider saving up for the full cash down payment and purchasing the car outright.

Securing the Loan

The financing is typically offered under the condition that the loan is secured with the car. This means the bank owns the car until you pay off the loan. If you don’t make the payments, the bank can seize and sell the car to recover the loan amount.

The bank requires the title from the dealer to secure the loan. They won't give you 90% of the money unless the dealer is willing to sign over the title, which they won’t do unless the selling price is paid in full.

What If I Need the Car Now?

If you need to drive the car immediately, you can look for a similar car with a similar price point and get a new loan. However, this is not ideal as it would involve multiple credit inquiries and could potentially damage your credit score.

Multiple Loan Applications

It's important to note that credit scoring companies/algorithms typically understand that people are loan shopping with multiple lenders and dealers. If you apply for a new loan within a few weeks or months, multiple inquiries for loans of similar amounts will still be counted as a single inquiry. This can help mitigate the impact on your credit score.

In conclusion, while it is possible to sign for a finance deal with an incomplete down payment, it's crucial to consider the potential risks and alternatives. Always ensure you can make the agreed-upon payments and consider saving up for a full cash down payment for the best financial outcome.