When you get a car loan, the only individual who can tell you what your required down payment amount will be is the lender. While the minimum may be enough to satisfy the down payment requirement, it’s in your best interest to use a larger down payment, if possible.

Minimum Down Payment Requirements

Down payments are based on a buyer’s specific situation, and vary by credit score and lender. If your credit’s in excellent shape, you may qualify for little to no down payment. On the other hand, if your credit is just so-so, you’ll have to make a minimum down payment of some kind.

When you’re a bad credit car buyer going through a subprime lender, a down payment is always required. Typically, these lenders require $1,000 or 10 percent of a vehicle’s selling price as a down payment, whichever is less.

Is the Required Down Payment the Best Amount?

smiling man next to carIt’s perfectly fine to pay the required down payment, but there are numerous benefits if you can afford to put down more. A larger down payment will reduce the amount of your loan, which can lead to lower monthly payments, or even a shorter loan term. It also reduces the amount of time your vehicle has negative equity (when you owe more on your loan than the car is worth).

So, what’s the ideal car loan down payment amount? There’s no number that’s set in stone, but an ideal down payment for reducing loan principal and negative equity is typically around 20 percent of a vehicle’s selling price. If you can’t afford to put down more than the lender is asking for, don’t stress – there are other ways to reduce costs and negative equity on a loan.

Making Your Loan More Affordable

As mentioned, a larger down payment can reduce the amount of your loan. When you borrow a lower amount, you can shorten the term of your loan, which saves you money by reducing the amount of interest charges you’ll pay. Another option for receiving this benefit when you can’t afford a larger down payment is to make extra payments whenever you can.

You can also split your payment – pay half of your monthly payment every two weeks (by your due date). Because there’s 52 weeks in a year, this method allows for 13 full payments a year instead of 12, helping you reduce the term of you loan, and potentially saving you hundreds in interest charges.

Pay the Right Amount for You

Once you’ve met the lender’s minimum requirements, there’s no right or wrong additional down payment amount. You have to budget for what’s best for you, and what gets you into the vehicle you need. If you’re struggling to find a lender who can help, turn to Auto Credit Express.

We work with a nationwide network of special finance dealers that have subprime lending options. These lenders can help people who have bad credit, no credit, and other credit issues such as a past bankruptcy. Don’t delay – fill out our auto loan request form to get started right now!