Here's some simple numbers to think about: $1,000, 10%, and 20%. What do all these numbers have in common? These are the most often recommended amounts to use when it comes to a car loan down payment. But how do you know what's the right amount for you to pay for a used car?

Minimum Auto Loan Down Payment Requirements

Auto Loan Down Payments for Used CarsMany people ask us what the minimum amount needed for an auto loan down payment for a used car is. The truth is that there's no one solid answer when it comes to down payments. However, when you're talking about bad credit car loans, there’s a minimum amount that lenders typically ask for – at least $1,000 or 10% of a vehicle's selling price.

If you're dealing with poor credit, there's no getting around the down payment requirement. Though the minimum amount varies by lender and car selection, you have to meet the requirement if you hope to get the auto loan you need.

Even though there's a specific amount you're required to pay, putting down a larger amount can save you money in the long run. In fact, the larger the down payment you make, the more money you could save overall.

Additionally, making a larger than required down payment is a good way to make the most of your car loan. A big down payment can do a lot more than save you money. It can change the loan terms you may qualify for or even help you qualify for a different type of vehicle.

Let's take a look at how different down payment amounts could affect your loan in the future.

Choosing Your Down Payment Amount

Imagine you're purchasing a used car which costs $6,000 and taking out a 48-month loan. Since people with poor credit often qualify for higher interest rates, let's say you're looking at 12% interest, and are asked to make a down payment of 10% of the vehicle's selling price (for example purposes, we're calculating without tax, title, or license fees, your actual costs will vary).

  • Negotiated selling price: $6,000
  • Interest rate: 12%
  • Loan term: 48 months
  • Down payment: $600

In this example, your total loan amount at the end of 48 months is $6,826 and you've paid $1,426 in interest while making a $142.20 payment each month. However, if you raise the down payment amount, you lower the overall amount you need to finance, which lowers how much you pay.

Now look at the same scenario using a down payment of $1,000:

With this down payment, you're looking at a total loan amount of $6,320 and only paying $1,320 in interest charges while your payment drops to $131.67 a month. As you can see, the more you use as a down payment the more you can save.

These examples show impact on a used car loan. The greater the cost of a vehicle, the more potential you have to save by making a larger down payment.

Additional Benefits of a Down Payment

So, if you're looking at these numbers and thinking, "pfft, that's not a huge savings, only a few hundred bucks," you're right. In this scenario, you're only seeing a few hundred dollars saved, but that can go a long way, especially in rocky economic times. Other benefits you're likely to see from a down payment impact your auto loan itself, not only how much you pay for it.

A large enough down payment can help you qualify for a shorter loan term. Sometimes, people with poor credit are signed up for longer term loans to bring a monthly payment into a more manageable range.

Everyone wants a low car payment, but don't forget that interest plays a huge part in an auto loan and the longer you're paying for it, the more money someone makes off you. If you don't play your cards right, you could end up paying more for a vehicle than it's worth when you stretch a loan term too far.

Additionally, a big down payment can help you qualify for a better car than you thought possible. Not only can a down payment impact how much or how long you're paying, it can influence what kind of vehicle you can drive, too. The more skin you put in the game, the more choices may open up for you when it comes to an auto loan.

Speaking of interest, a large enough down payment may even allow you to qualify for a lower interest rate. This is rare, but if you're putting enough down on a car, you may be able to negotiate for a lower interest rate.

Ready to Get Started?

Now that you know the ins and outs of making a down payment on a used car, you can start searching for the vehicle you need and a lender that can get you into it. You don't have to search far or wide when you have us on your side, though!

At Auto Credit Express, we’re teamed up with a nationwide network of special finance dealerships that have lenders equipped to work with many types of credit situations. We want to connect you to a special finance dealer. To get started now, fill out our free car loan request form!