How Much Is the Average Down Payment on a Car | FINN (2024)

FAQs

How Much Is the Average Down Payment on a Car | FINN? ›

The typical down payment for a car is between 10% and 20% of the vehicle's total value. Used cars usually require down payments closer to 10%, while the down payment for a brand-new car is generally closer to 20%. As with a mortgage, the down payment for an auto loan is a major expense.

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.

If you're considering a car that costs $25,000, putting down between $2,000 and $4,000 would be wise. However, the true answer to this question depends on your negotiation strategy. If you can negotiate a lower price or better terms, putting more money down may not save you much interest.

How much should you put down on a $25,000 car? For a $25,000 car, consider putting down at least $2,500 if it's used or at least $5,000 if it's new. By putting 10% or 20% down depending on the car's condition, you'll have the best options for loan terms and interest rates.

If you're looking to purchase a used car for around $10,000, then $1,000 is a decent down payment. It's widely advised to put down at least 10% of the vehicle's value to increase your odds of getting approved for a loan, and to minimize your interest charges.

Keep Your Car Payment Under 15% of Your Net Income

“A widely accepted rule is that your car payment should not exceed 15% of your monthly take-home pay,” said Jeff Rose, a certified financial planner and founder of Good Financial Cents. If you earn $70,000 a year after taxes, that breaks down to roughly $5,833 a month.

The credit score required and other eligibility factors for buying a car vary by lender and loan terms. 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.

Key takeaways. Down payments reduce the amount of money you must borrow and, thus, the interest you pay while repaying your car loan. Experts recommend a down payment of at least 20 percent. Larger down payments may prevent becoming upside-down on your loan.

How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.

Your credit score is crucial to determine your eligibility for a no down payment car loan. Most lenders require a FICO credit score of at least 680 before you can qualify. If your credit score falls below 680, improve your credit score before you apply to help you qualify in the future.

Is it bad to put too much down payment on a car? ›

Here's the short answer: As much as your wallet can comfortably afford! You see, making a larger down payment is one of the best ways to secure approval for an auto loan – even if you've got less-than-stellar credit. And speaking of wallets – it'll save yours some loot by lowering interest payments in the long run too.

72 months (six years)

Use a money order or electronic funds transfer (ETF): Because most dealerships won't accept a large down payment in physical cash, consider using a money order to certify the funds or have your bank transfer them electronically.

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.

Can you use a credit card for a car down payment? Putting a car down payment on a credit card is an option that many dealers are open to. Dealers may be more willing to allow this type of payment for the total amount, or a partial amount, of your car's down payment.

A down payment may help you to more easily qualify for an auto loan, especially if you have lower credit scores. Without a down payment, the lender has more to lose if you don't repay the loan and they need to repossess and sell the car. Cars can begin losing value as soon as you drive off the lot.

Down Payment Rules to Live By

A good rule of thumb for a down payment on a new car loan is 20% of the purchase price. A down payment of 20% or more is a way to avoid being “upside down” on your car loan (owing more on the car than it's worth).

It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate.

As a general rule, you should pay 20 percent of the price of the vehicle as a down payment. That's because vehicles lose value, or depreciate, rapidly. If you make a small down payment or no down payment, you can end up owing more on your auto loan than your car or SUV is worth.

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.