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Do I need a down payment or can I get 100% financing to buy a car?

A down payment is generally not required.  Genisys will finance up to 100% of a car’s purchase price assuming you meet the credit qualifications for the full financing.  Factors such as limited job time or limited credit history are two situations that may require a down payment.  One thing to consider with 100% financing is whether or not you are comfortable with little to no equity in your car.

What is equity in a car?
The equity is the value of your car above what you owe on your auto loan. For example, if you owe $8,000, and your car is worth $12,000, then you have $4,000 equity.  Equity in your car is important since it ensures that if you go to trade in or sell your car before you pay off your loan, you will not owe any money over and above the car’s current value. 

Many people still take the 100% financing option, and that is okay.  When financing the full value of the car, you will at some point end up with negative equity—or owing more than the car’s value.  Simply driving a car off the dealership lot will decrease its value.  By keeping the term of your loan short or making extra payments when possible, these will help to keep the negative equity low.  Another good option is to purchase GAP insurance.

What is GAP and when do I need it?
GAP stands for Guaranteed Asset Protection.  This insurance covers the ‘gap’ or the difference between what is owed on the car and what the car is worth should you have an accident which causes the insurance company to “total” your car.  This means they will write you a check for the determined value of your vehicle.  Without GAP insurance, you may end up having to continue making loan payments on a car you can’t even drive. 

For example, suppose that you finance a new vehicle, and two years later you have an accident that results in a total loss. The car has decreased in value. If you still owe $20,000 for a car that is now only worth $15,000, you still owe the lender a ‘gap’ of $5,000.  GAP insurance will pay for that difference.

The cost of a GAP policy is generally a few hundred dollars, and can be added into the loan amount.  Genisys Credit Union offers affordable GAP policies when you finance with us.  Talk to a Genisys loan representative to get more information and be sure to include this in your financing option comparisons.

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