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How much of a down payment do you need for a bad credit car loan?

One of the many questions customers ask us here at Auto Credit Express is how much they need for a down payment. If you asked this question a few years ago, the answer would’ve been much different, but things have changed.

A bit of history

In the past, a sizable down payment was a “must have” for anyone who needed a bad credit car loan. Most lenders required at least $1000 dollars down or 10% of the selling price, whichever was higher. High risk car loan lenders required even more – with some requiring up to 20% down.

How things have changed

In today’s market, you can divide sub prime auto lenders into two basic groups. The first group, which we’ll call the lower tier lenders, requires $1,000 down or 10% – whichever is less. This means if the purchase price is $10,000 or more, the required down payment is $1,000. If the selling price is less, the down payment is 10% (although any car selling for less is a rarity, since most bad credit auto lenders don’t like to finance older, high mileage cars).

The second group of upper tier lenders requires no money down. That’ correct. If you qualify for a loan with one of these lenders, you will not be required to put any money down to buy a car.

The Bottom Line

Since you don’t know which tier you will fall into, it’s a good idea to make sure you have $1,000 for a down payment. Even if you qualify for a zero down loan, a down payment will help reduce your monthly payment as well as cut down on interest expenses. Also remember that in addition to the down payment, you will also need to budget for an initial car insurance payment. To help you with your budget, those of us at Auto Credit Express have developed a few auto loan calculators so that you can see how a car payment with fit into your budget. You can calculate your monthly payment as well as determine how much you can save by increasing the amount you pay to the bank each month. Because here at Auto Credit Express, we want to help you get back “on the road” to good credit.

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