The simple answer is no, you generally can’t buy a car with bad credit and no money down. A down payment is almost always required when taking out a subprime auto loan. The good news is you don’t have to shell out thousands of dollars to meet the down payment requirement.
Bad Credit Car Loan Down Payment Requirements
Just how much you need to put down ultimately depends on the lender you’re working with. Generally, though, most subprime lenders require at least $1,000 or 10 percent of the vehicle’s selling price. They take the lower amount between the two, so you could only need a small down payment depending on the price of the car you finance. For example, you'd only be required to make a $500 down payment if you finance a $5,000 vehicle because 10 percent of $5,000 is $500, which is less than than $1,000.
However, we recommended that you put as much money down as possible to help save on the overall cost of the auto loan. Personal finance experts recommend 20 percent, but the highest amount that you can comfortably afford works just as well.
If you plan on financing through a buy here pay here dealership, a down payment is also almost always required, and they may ask for more than a subprime lender. A down payment with one of these dealers usually covers the cost of the car and, depending on the vehicle, you may need to make a down payment that’s well over 20 percent.
Coming Up with a Down Payment
Now that you know you have to make a down payment, how do you come up with the money? There are three ways you can go about this:
- Pay cash – If you don’t have a trade-in, you can make a down payment in cash.
- Use trade-in equity – If you have a trade-in you own or that has equity, you can apply that toward the down payment requirement. If your trade-in doesn’t have equity, make sure you have the cash to cover any negative equity before trading it in. Otherwise, the balance gets rolled into your new loan, which is almost like paying for two loans at once.
- Use a combination – If your trade-in equity doesn’t cover the down payment requirement, or you want to make a bigger down payment to lower the overall cost, you can use trade-in equity and cash together.
If you want to see how different down payments affect your car loan, check out our Auto Loan Monthly Payment Calculator and play around with different numbers. Make sure you have an idea for how much you want to spend on a vehicle, your ideal loan term, and the interest rate you're likely to get.
Ready to Get Financed?
Ultimately, a down payment helps you more than it hurts you. While it can feel like a waste to put money down up front, it helps you get approved if you have bad credit and helps you save money in the long run.
If you have a down payment ready to go, and just need extra help finding a lender to work with, let Auto Credit Express be your guide. We help consumers find financing by connecting them to local special finance dealerships that work with lenders that assist people in difficult credit situations. Fill out our secure auto loan request form and we'll work to match you with a dealer in your area right away.