A down payment is the money that you pay upfront towards a vehicle purchase. It can be any combination of cash and a trade-in. And the larger the down payment on your vehicle, the more you’ll save on your monthly payment and in interest. A larger down payment means a smaller principal for interest to accumulate on.
Use Bankrate’s auto down payment calculator to estimate how much money you can save in interest, as well as what your monthly loan payment will be, based on the amount of the money you bring to the table.
How much should you put down on a car?
A down payment between 10 to 20 percent of the vehicle price is the general recommendation. But if you can afford a larger down payment, you can save even more money on interest payments over the life of the loan. By dropping the amount financed, you save some even before you start negotiating the car price.
For drivers with poor credit, a down payment can prove to be instrumental in gaining approval and receiving competitive rates. It is an excellent way to show potential lenders your commitment to the purchase and paying the loan off. If you still can't get a great rate when you first buy with a down payment, you may be able to refinance later for a better rate.
In either case, be careful while shopping. By making sure the vehicle fits, and not just the payment, you will save in the long run.
What to consider when deciding on a down payment
Consider the differences between a new and used vehicle when determining how much money to put down.
Down payment on a new car
New vehicles depreciate at a much faster rate than if you were to purchase used. A high down payment of 20 percent or more can help protect you from that loss of value by making sure you have more equity in the car than what you owe. However, just because you can pay more cash upfront doesn't mean you should sign off on a vehicle that you cannot truly afford. Make sure your monthly payments, insurance and fuel costs are within your monthly budget.
Down payment on a used car
A used car, on the other hand, requires a less steep down payment. Because the value of a used vehicle has already undergone most of its depreciation, your down payment should be a minimum of 10 percent. However, just as with a new car, the higher the down payment is, the more you will save on accumulated interest.
Down payment on a leased car
A large down payment can be helpful when buying a new car, but this approach is typically a bad idea when leasing a vehicle. If something happens to your leased car, your insurance will reimburse the leasing company rather than you, and you won’t get a refund for your down payment. What’s more, one advantage of leases is lower up-front costs. Providing a large down payment defeats this benefit.
The bottom line
If you do not currently have the financial stability or urgency for a new vehicle, it may be worth your while to save for a down payment before shopping for your vehicle. Consider creating a budget with that 10 to 20 percent number in mind before setting your sights on a vehicle loan.
FAQs
A down payment is calculated as a percentage of the final purchase price. For example, if a car you're looking at is $30,000, here are a few different scenarios based on the percentage you may want to put down: A 5% down payment is $1,500. A 10% down payment is $3,000.
What's a good down payment on a 30k car? ›
Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.
What's a good down payment on a 50k car? ›
A down payment between 10 to 20 percent of the vehicle price is the general recommendation.
How much of a car payment should I put down? ›
In general, you should strive to make a down payment of at least 20% of a new car's purchase price. For used cars, try for at least 10% down. If you can't afford the recommended amount, put down as much as you can without draining your savings or emergency funds.
What is a realistic down payment for a car? ›
The typical down payment on a car ranges from 11% to 20% of the car's value. The credit bureau Experian says a 20% down payment might help shield you from depreciation. Depreciation refers to the ever-shrinking value of your car.
How much is a $20,000 car loan for 5 years? ›
A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05. That same wise shopper will look not only at the interest rate but also the length of the loan.
How much is a $30,000 car payment for 5 years? ›
Provided the down payment is $5,000, the interest rate is 10%, and the loan length is five years, the monthly payment will be $531.18/month. With a $1,000 down payment and an interest rate of 20% with a five year loan, your monthly payment will be $768.32/month.
What are the disadvantages of a large down payment on a car? ›
What Are the Disadvantages of a Large Down Payment? Providing more money down doesn't guarantee a lower interest rate, and it can cut into your savings.
What credit score is needed to buy a 30k car? ›
Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian. Meanwhile, low-credit borrowers with scores of 600 or lower accounted for only 14% of auto loans.
What should your salary be to afford a 50k car? ›
If you wanted to stick to this rule of thumb and buy a $50,000 car, you would need a monthly take-home income of at least $7,240 if you got a car loan at a below-average rate and stretched out your payoff time for a long time. Many people will find that purchasing such an expensive car really isn't affordable.
To buy a $50,000 car and get favorable auto loan options, it's best to have a credit score in the prime or super prime categories. Prime borrowers are those with a credit score within the 661-780 range, while super-prime borrowers fall within the 781-850 range.
Is 50% too much of a down payment for a car? ›
If you want to, you can definitely make a 50% down payment on a car if you have the cash. It's uncommon, but as long as you finance at least the minimum amount – usually $5,000 if you have bad credit – lenders don't have a problem with you making a really big down payment.
What is a decent credit score to buy a car? ›
Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.
What is a good APR for a car? ›
Average car loan interest rates by credit score
| Credit score | Average APR, new car | Average APR, used car |
|---|
| Prime: 661-780. | 6.89%. | 9.04%. |
| Nonprime: 601-660. | 9.62%. | 13.72%. |
| Subprime: 501-600. | 12.85%. | 18.97%. |
| Deep subprime: 300-500. | 15.62%. | 21.57%. |
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It's possible to make a down payment on a car with a credit card, though usually only when buying a car from a dealer. Purchasing a car from a private party will likely require cash, check or electronic transfer from a bank or other financial institution.
How do you calculate total down payment? ›
The formula looks like this: Down Payment = Purchase Price × Down Payment Percentage. Down Payment = $200,000 × 10%
What is the payment on a 72-month 1.99% car loan for $60,000? ›
The monthly payment on a $60,000 car loan with a 1.99% interest rate over 72 months is $854.77.
How much is the monthly payment on a $35000 car loan for 72 months? ›
If you take out a $35,000 new auto loan for a 72-month term at 4.0% interest, then your monthly payment will be $547.58. Although your monthly payments won't change during the term of your loan, the amount applied to principal versus interest will vary based on the amortization schedule.
