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Independent machine intelligence · Research before the decision
THE MACHINEBLUE BOOKResearch · Market · Ownership
MBB Explains · Film 05

What a Down Payment Really Does

A bigger down payment can shrink the loan. It can also shrink the money for next Tuesday.

Open the machine financing resourcesMore MBB Explains films
MBB Explains · 58.4 secondsOriginal MBB animation · English captions

About this film

A bigger down payment can shrink the loan. It can also shrink the money for next Tuesday.

Bronto explains the tradeoff. Suppliers remain remarkably uninterested in how impressive the machine looks.

Example assumptions

$200,000 machine minus $40,000 down = $160,000 borrowed. No other charges financed. A larger deposit reduces borrowing and interest only holding rate, term, repayment structure and other charges constant.

Educational boundary

General educational information only, not an offer of financing, a recommendation to borrow, or individual financial, tax, legal, engineering or safety advice. All dollar amounts are USD. Bob, the finance representative and their situations are fictional. Numerical examples are hypothetical, not current offers, market benchmarks, normal rates, quotes or promises of approval or return. Eligibility, terms, fees, tax treatment, ownership rights and laws depend on the actual agreement, jurisdiction and circumstances. MBB is an independent information resource, not a law firm, and is not acting as your lender, broker, attorney, accountant, financial adviser or site engineer. Consult appropriately qualified professionals and read the actual written terms before deciding. Commercial equipment credit does not automatically receive consumer mortgage protections.

An MBB Explains short, narrated by Bronto. Fictional illustrations turn machinery questions into something a little easier to understand.

Independent machinery knowledge. Understand the numbers before deciding.

Original MBB animation with synthetic Bronto narration. Narration: synthetic Bronto voice. The film uses English captions as a separate track, so they can be turned off.

Read the complete transcript

Bob is buying a two hundred thousand dollar machine with forty thousand down. The down payment is his money paid upfront. The remaining hundred and sixty thousand is borrowed. A larger down payment usually means less borrowing, lower payments and less total interest, assuming the same rate and term. Splendid. There is, naturally, a catch. The cash leaves immediately. Money inside the machine cannot also buy materials next Tuesday. Bob has attempted this arrangement. His suppliers were remarkably unsympathetic. Compare several down payments using the actual offers. Check the resulting payment, total cost and cash reserve. Rates or approval terms may change with the amount down. The largest deposit is not automatically the best one. Explore the tradeoffs at Machine Blue Book. General education, not individual advice.