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A. This is an opportunity cost question. What is the next best thing you would do with your money? If the loan interest rate is 2% and you believe you can invest your downpayment and get more than that during the life of the loan, you’re better off investing your money and paying someone for the use of theirs.
B. However cash flow may be the real priority. For example, if $300 per month is the maximum monthly payment you can afford, you may have no choice but to put down $10,000 on a $26,000 car to get the payments where you need them. If you don’t have that $10,000 (trade plus cash), it may be a sign you cannot afford the car.
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