Personal Finance

Auto financing question - larger down payment vs lump sum payment

  • Last Updated:
  • May 9th, 2022 9:07 pm
[OP]
Jr. Member
Jan 21, 2011
125 posts
24 upvotes
Toronto

Auto financing question - larger down payment vs lump sum payment

Hi all

Is there any difference between putting $15k down payment on a car, vs putting a $5k down payment and then
on day 1 of getting the car, putting a lump sum payment of $10k into the total loan to reduce the amount owed?

Assuming there's no penalty for prepayment / lump sum payments

Thanks
Jason
1 reply
Member
Mar 8, 2017
211 posts
102 upvotes
Technically, no difference. Some lenders will even allow you to apply the day 1 lump sum payment to reduce payment by keeping original term the same OR reducing amortization and keeping payment the same. The loans are open with no prepayment penalties.

Only thing to consider because I don’t know the size of the loan, is that depending on the amount to finance, your initial $15k down payment may bring you under the amount to finance threshold to get the lowest available rate. In that case, better to put $0 down. Get the lowest rate for the amount you’re borrowing and then do the lump sum payment after the fact and take one of those options above.

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