The Sweet Spot New Car Down Payment is….

Many car buyers make the mistake of making a down payment based upon how much they believe they can afford in monthly payments. This, according to financial gurus, is the wrong approach to take.

Instead, these experts say the basic rule of thumb for a new car down payment should be to put at least 20% down. Since the national average was 11% last year, this is a large increase. However, this 20% is a great figure because it’d keep your car purchase from ever being upside down. This is especially important if you need a bad credit car loan.

Avoiding being upside down is very important, since when you owe more than what the vehicle is worth, you will not be able to sell the car in the case of an emergency. Also, being upright with your loan will protect you in the event that your car is totaled in an accident or stolen. Talking about this, Ronald Montoya, consumer advice editor at Edmunds, said, “By placing a bigger down payment, a new car buyer can offset the vehicle’s initial depreciation and earn equity in the car sooner.”

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