What Is Down Payment

Down payment refers to the partial payment of a loan or mortgage that is made up front at the time of the vehicle purchase. It is the initial good faith deposit with the balance to be paid later. For instance during the purchase of a vehicle, the buyer makes a down payment and expresses his intention to purchase the vehicle that is offered for sale. He also reserves it for himself which otherwise might be sold to someone else. It is also called as good faith deposit because a percentage of the total purchase price of a product or service is paid incase the purchase is made on credit. Even in installment and easy monthly payment schemes of vehicles, the buyer is required to pay a part of the total price as down payment which is usually in cash. The balance amount is paid in the fixed installment periods as agreed between the seller and buyer of the vehicle. Higher the down payment during the purchase of a vehicle, lower the installment amounts and other interest rates.

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