Lets assume the negotiated price with the dealer is 30,000. You want to finance through your own bank and you've been approved for 30,000 ... but you want to put 5000 down.

Option #1:
Give the 5000 dollar check to the dealership, they give you the bill of sale for 25,000 which you take to your bank to finance 25,000 ?

OR

Option #2:
You get the bill of sale from dealership for 30,000, bring it back to your bank, give the 5000 downpayment check to your bank, they then finance you for a loan of 25,000


Which one is correct?
Basically my question is do you give your downpayment check to the dealer or to the bank that is financing your loan?

Thanks.

 

It shouldn't matter.

Either way you are still financing $25k.

But I would think Option #1 would be easier. How will the bank handle the $5k payment right away? At least through the dealer it's taken care of already.

 

Why not just tell your bank that you only need loan for $25k and give the dealer a check for $5k from your own account.

 

Depends on your credit situation. The down payment is not to make the care cheaper, but to give the bank some of its money now, just in case you default on your loan. This way they'll have gotten some of their money already...

 

The easiest way to do this is get the bank on the phone with the dealer. If you are approved for the loan, the bank will vouch for you with the dealer, and you write a check to the dealer for the full amount. The bank deposits the 25K into your account and everyboys is happy.

 

Your best bet is ask your bank what is your interest rate say 5% then ask your dealer to beat it. Go to ever will give you the best rate. Your 39 cents will work to all of them. Just remember how you pay for the car has nothing to do with the price. It is a separate deal. You just have to be prepared to walk. You can always turn around again and say screw me i'll take your bad deal. Your down payment is determined at the loan origination
with the company that makes the loan.

 

The bank gets some of its money down, when you pay the dealer the downpayment. Using your example, by paying $5k to the dealer and financing $25k, your note is $5k less than the value of the collateral (the car - excluding depreciation, of course!)

Assuming that your credit is good - none of this matters - most institutions take the risk of loaning you the full purchase price - perhaps hedging their bets with a slightly higher interest rate. If your credit isn't as good - or established - you simply need to make a downpayment equal to a magic number that they know. This number is the amount that covers their risk - which is the sum of some interest, the depreciation, and any legal costs they incur for a repossession.

All of that said - downpayment goes to the dealer, along with your loan check - which should be $25k.

 

This is how it worked for me:

My credit union rep told me they do not need the down payment. All they need is the exact amount of loan. They asked me to pay the downpayment amount directly to the dealer ... and then give them the balance amount .. which will be total loan. BTW 3.75% is a pretty good interest rate isn't it?