We get a lot of questions from consumers at Auto Credit Express, but one of the most common is "how much of a down payment do you need for a down payment on a bad credit car loan?". The truth is it varies based on many factors. However, there are a few tips and tricks we have to help you determine what a good down payment for your situation is.
What's A Good Down Payment On A Car?
A good down payment amount is relative to the sale price of the car and depends on your credit score. If you're looking to place a larger down payment on a car loan, it may help solve some of the credit issues if you have bad credit. Most experts suggest you place at least 20% down on a car when you purchase it and never go below 10% unless you financially have to.
- For a brand-new car, the required initial payment, or cash due at signing, is usually predetermined.
- For a used car, you generally want to put at least 10% down or more of the vehicle's sale price.
- Most lease customers should just stick with the required cash due at signing, instead of paying as much down as possible.
A lender may require more money down on a new car than a used car to help offset any depreciation it may incur.
Bad Credit Car Loan Down Payments
If you have bad credit, poor credit, or even no credit, you should expect to have a minimum down payment of 10% or $1,000 for your car, whichever is the lower amount. If you're trying to get a high-risk auto loan, you may even have to have a higher down payment.
If you're not sure where your credit stands, you can get your credit score here. Take a look at some of the common sales prices for cars and how much of a down payment you’ll need with bad credit:
| Sale Price | Percentage | Est. Down Payment |
| $15,000 | 10% | $1,500 |
| $20,000 | 10% | $2,000 |
| $25,000 | 10% | $2,500 |
| $30,000 | 10% | $3,000 |
| $35,000 | 10% | $3,500 |
Where Does The Down Payment On A Car Go?
Whether you have good credit or bad credit, putting money down on a car has advantages. The larger the down payment means you’re paying less each month toward the car, and, in some cases, you may get a better interest rate.
The general rule of thumb is that you’ll drop $20 on your payment for every $1,000 you put down on a car, but this isn’t always the case and every loan and situation is different.
A down payment is primarily used to offset any depreciation that the car may incur as soon as it's driven off the lot. If you don’t use a down payment on your car loan, then you instantly be paying more than the car is worth once you add in all the fees, tax, and other costs, which puts you underwater on your car loan right away. When you have equity in your car, it gives you quite a bit of flexibility in the future if you were to trade it in or sell it.
The bottom line. If you don’t know which credit tier you fall into, it’s a good idea to plan for a 10% down payment when you talk to a dealer, even if you qualify for zero down. The down payment can help you reduce your monthly payment as well as cut down on interest charges. Keep in mind that you also need to budget for the initial car insurance purchase with your 10% down for a car.
