When taking out a bad credit auto loan, a down payment is usually required. A down payment is important because it lets the lender know that you’re serious about the loan, and are willing to put your own money into it.

Down Payment Requirements for Different Lenders

Why Is There a Need for a Down Payment with Bad Credit Auto Financing?Each lender is going to have a different down payment requirement. Some may ask for more, some may ask for less – it all depends on your credit situation, vehicle choice, and loan programs they offer.

When you have bad credit, the likelihood of getting financed through a direct lender, such as a bank or credit union, is slim. Although you should still try to get pre-approved, don’t be surprised if they turn you down.

So, if you can’t go to your bank or credit union, where can you find financing? There are two main types of lenders that offer bad credit car loans: subprime lenders and buy here pay here dealerships. Let us explain the difference between the two, and what their down payment requirement may look like:

Subprime lenders – These lenders work through special finance dealers, and cater to borrowers struggling with credit issues. Subprime lenders use your credit score to qualify you, but also consider additional factors such as income and residence stability. Their typical down payment requirement is $1,000 or 10% of the vehicle's selling price, whichever is less, but this can vary from lender to lender

Buy here pay here dealershipsBuy here pay here dealers are a type of in-house financing dealership, which means they are both a dealer and a lender. Many of these dealerships don't check credit when qualifying applicants, they base approvals on your income. Their typical down payment requirement varies more widely by lender, but it usually depends on the price of the car you choose.

Understanding How Larger Down Payments Help

Did you know that the larger the down payment you make, the more money you save? It’s true, and we suggest that you try to make as large of a down payment as possible if you’re dealing with less than perfect credit.

Not only do you lower your monthly payment, you end up saving money in the long run by lowering your interest charges. If you get approved for a higher than average interest rate, you’re going to see just how big of a difference a larger down payment can make.

Let’s test out how a larger down payment helps with an example (please note that we’re not including tax, title, and license fees in our calculations):

  • Vehicle price: $13,750
  • Loan term: 60 months
  • Interest rate: 17%
  • Trade-in value: $1,300
  • Lender down payment requirement: $1,000

 Down Payment Amount 

 Monthly Payment 

 Total Interest Paid 




$1,000 (minimum)



$1,300 (trade-in)



$2,750 (20%)



The Bottom Line

The larger the down payment you make, the more you end up saving on the overall cost of your auto loan. You can use cash, trade-in equity, or a combination of both to meet the down payment requirement. If you can’t make a huge down payment, that’s OK – any amount helps.

If you have your down payment ready, but don’t know where to find a dealer to work with, we want to help. At Auto Credit Express, we work with a nationwide network of these dealerships and have been helping match borrowers in need with them for over 20 years.

Let us help you get connected to a dealer near you. Get started by filling out our easy car loan request form now.