Frequently, customers ask us about the down payment requirement and how much, or little, they can put down on a car loan. You can make a $500 down payment on a bad credit auto loan only if it meets the lender's requirement. Bad credit lenders typically ask for money down, but the amount needed varies by lender.
General Down Payment Requirements
No matter which type of lender you work with, whether it be a subprime lender that works through a special finance dealership or a buy here pay here dealer, a down payment is usually required when taking out a bad credit car loan.
This is to make sure you’re committed to your own success – lenders want to see you invest your own money into the auto loan. You can make the down payment by using cash, trade-in equity, or a combination of both.
As for the minimum down payment needed, subprime lenders usually require at least $1,000 or 10% of the vehicle’s selling price, whichever is less. However, the specifics can vary from lender to lender, so this isn't set in stone.
So, if this was the requirement for you, your down payment could be $500 if you end up financing a $5,000 car.
Should You Make a Larger Down Payment?
There’s nothing wrong with making the minimum down payment. However, we recommend you make the largest down payment you can comfortably afford if you have less than perfect credit.
When you make a larger down payment, you do two things: lower your monthly payment, and decrease the overall cost of the loan. This is something important to consider, especially if you have bad credit, since you’re more than likely to qualify for a higher than average interest rate. The best way to diminish interest’s impact is to put more money down.
Unsure about all of this? Let’s take a look at an example.
Kevin is looking to finance $11,000 for 36 months. He’s been approved at an interest rate of 12%, and has a vehicle to trade in that’s worth $1,200. Here’s how different down payment amounts affect his auto loan:
| Down Payment | Monthly Payment | Interest Charges Paid |
| $500 | $349 | $2,055 |
| $1,200 (trade-in) | $326 | $1,918 |
| $2,200 (20%) | $292 | $1,722 |
If you would like to see what your car loan could look like with various down payment amounts, you can use our Payment Calculator and Car Loan Estimator. Keep in mind that the amounts are estimates, and don’t include tax, title, and license fees.
Find a Car Dealership Near You
If you’re on a tight budget, you can make a $500 down payment only if it fulfills the subprime lender's requirement. However, keep in mind that the more money you put down, the more you're helping yourself save in the long run.
Once you have your down payment set aside and you’re ready to get the financing process started, Auto Credit Express is here to assist. We can work to match you with a local dealership that’s right for you. There’s no obligation to buy, and our service is always free. Fill out our auto loan request form to get started today!
