Finding the ideal car loan down payment can be a challenge. How much you’ll need to put down depends on the lender’s requirements as well as your own finances.
Car Loan Down Payment Requirements
Unless you have a high credit score, lenders will almost always require you to put money down. The minimum requirement varies, but lenders typically ask credit-challenged borrowers for a down payment of $1,000 or 10 percent of the vehicle’s selling price, whichever is less. While these are just the minimum requirements, if you’re willing and able to put more money down, we highly recommended that you do.
The More, the Better
The higher the down payment, the lower the overall cost of your auto loan will be in the long run. One of the biggest benefits to putting down more money is the ability to offset a vehicle’s depreciation rate. Within the first year, a new car loses about 20 percent of its resale value. If you’re able to match close to that 20 percent with a down payment, you’ll probably be able to maintain an equity position in your vehicle during the first year.
In addition to at least partially offsetting depreciation, there are many other benefits to a down payment. A down payment can help you get approved if you’re dealing with bad credit, reduce your monthly payment, and decreases the overall interest charges on your loan.
If you’re unable to hit the 20 percent mark, know that any amount you put down will help you. Make sure you budget for a down payment beforehand. Since it’s not always easy to budget when finances are tight and your credit is rocky, you’ll want to take your time and make sure you have one before you begin the process.
Having a down payment is important when you’re dealing with bad credit and need an auto loan. Subprime lenders, in fact, typically won’t let a borrower take out a loan without one. Just remember that the down payment is there to help, not hurt you.
If you’re worried about your credit getting in the way of an auto loan, let Auto Credit Express point you in the right direction. We can help by connecting you with a dealer in your area who has the lending resources to help people with credit challenges. Just fill out our auto loan request form to get started today.