How much should you put down for your first car?

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Buying your own car is still a dream for many people. However, before making the decision to purchase, it's important to carefully plan your finances to ensure that your car payments don't become too stressful.

One of the key things to know and plan for before buying a car is the down payment. The more you put down, the more it will help reduce your monthly car payments.

How is interest calculated for a car loan?

Car loans typically use a flat interest rate, calculated based on the initial loan amount. For example, if a car costs 1,000,000 baht and you make a down payment of 300,000 baht, you'll need to borrow 700,000 baht. If the financial institution charges 5% interest per year and the loan term is 5 years, the annual interest would be:

700,000 x 5/100 = 35,000 baht per year

So, how much should you put down?

As we know, a higher down payment will help lower your monthly payments. If you don't have enough savings to make a large down payment, it's recommended to aim for around 25-40% of the car's price. If you put down less than this, you might need a guarantor, or if your income isn't twice the monthly payment, you might need a co-borrower to improve your chances of approval.

For a used car, the down payment is typically around 10% of the car's value, though this can vary depending on the conditions and considerations of the financial institution.

So, before deciding to buy your first car, in addition to considering the brand, model, and performance of the vehicle, you should plan your finances, especially regarding the down payment. This will help ensure that managing the car loan doesn't become too stressful for you.

Read More: Tips for Paying Off Your Car Loan Faster!

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