When you're financing a car in Los Angeles, the down payment you need depends on a few things, but it mainly comes down to your credit score and the lender you're using. If you have excellent credit, it's possible you may not even need a down payment. If you have bad credit, on the other hand, you're usually going to have to make a down payment.
Determining Minimum Down Payments
Even though zero down auto loans in Los Angeles are possible for some borrowers, these loans are few and far between. The general recommendation has long been to make a down payment of at least 20% of the vehicle’s selling price, or the largest one you can.
Putting money down reduces the overall cost of your loan, as well as the time you spend with negative equity. Having negative equity means you owe more on your loan than the car is worth, which can create problems if your vehicle is stolen or totaled, or you want to trade it in or sell it.
When you have poor credit, lenders understand that it may be more difficult to come up with a large amount up front. That's why subprime lenders that offer bad credit auto loans typically have a minimum down payment requirement of 10% of a car’s selling price or $1,000, whichever is less.
Down Payment Requirements for Bad Credit
The reason subprime lenders usually have a down payment requirement in place is that they like to see you have some "skin in the game." This shows lenders you're serious about successfully completing your auto loan.
A down payment is just one of several requirements for borrowers with bad credit. Rather than relying on your credit score alone, these lenders look to other factors, such as income, residence stability, and making a down payment. These give them other things to base loan approvals on.
Making a Down Payment
When it comes to making a down payment, it can be difficult to come up with thousands of dollars – or even hundreds of dollars, for that matter – in cash. Luckily, down payments don't have to be made in cash alone.
You have three options for coming up with a down payment:
- Cash – Pay the entire amount in cash.
- Trade-in equity – If you have a trade-in with enough equity, you can use it to cover all (or at least some of) your down payment.
- Combination – If you don’t have enough equity, or you want to make a larger down payment, you can combine cash and trade-in equity.
Now that you know you don't have to come up with the total amount needed for a down payment only in cash, are you ready to search the City of Angels for your next vehicle?
Let Us Help Narrow Your Search
At Auto Credit Express, we have a nationwide network of special finance dealers that have the lending resources needed to finance a car with bad credit. This includes many dealerships in and around Los Angeles.
If you're ready for your next vehicle, don't wait any longer! Simply fill out our easy auto loan request form online, and get the process of getting connected to a local dealer started today.