What's the Smallest Down Payment I Can Make on a Car Loan?

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Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, Automotive Content Editor - April 19, 2021

Most borrowers want to know how much they have to put down on a car loan. The truth is that your down payment amount is influenced by many factors, including your credit score, the vehicle you're financing, and the lender you're working with. If you have bad credit and need a subprime auto loan, they usually have similar minimum down payment requirements that you can prepare for.

Minimum Down Payment Requirements

When you're dealing with poor credit, the smallest down payment you can typically make is 10% of the vehicle's selling price or at least $1,000. In some cases, a lender may accept the lower of the two amounts, but not every lender does this.

If you have a credit score above 660, you're usually considered to have good credit and your down payment amount could vary more than a bad credit borrower's. This is because most bad credit lenders have a set minimum down payment amount, while not all traditional lenders do.

With good credit, you may not be required to put as much down. On the other hand, borrowers with better credit often qualify for larger loan amounts, which means even a 10% down payment could be a significant amount of money.

What Does 10% Look Like?

The standard recommendation for many years was to strive to put down at least 20% of the vehicle's selling price on a new car, and no less than 10% on a used vehicle. This is still good advice but isn't followed as closely as it used to be due to the rising prices of automobiles – the average cost of a new car in 2021 is estimated to be around $40,000.

When you're financing a vehicle with bad credit, lenders typically won't lend less than $5,000. This doesn't mean the car you choose has to cost this much, but the total of the loan after taxes and fees must total at least $5,000.

With the minimum requirement of 10% in mind, here's an example of what the smallest down payment you could make might look like for a loan:

Vehicle Cost 10% Down 15% Down 20% Down
$5,000 $500 $750 $1,000
$12,000 $1,200 $1,800 $2,400
$15,000 $1,500 $2,250 $3,000
$24,000 $2,400 $3,600 $4,800

Note: The above numbers are solely examples and don't reflect taxes, surcharges, or additional auto loan and dealer fees. Your minimum down payment amount will vary based on your situation.

Why Even Make a Down Payment?

The reason experts recommend having a down payment of 10% is to offset the depreciation of the vehicle. A larger down payment is recommended for new cars because they depreciate at a faster rate than used vehicles. Typically, a new car loses around 10% of its value as soon as it's driven off the lot and can lose as much as 20% of its value by the end of the first year of ownership.

The more money you put down, the less you have to finance, ultimately saving money in the long run. When you make a down payment you're setting yourself up for success in your auto loan. The less you borrow, the lower your monthly payment is and the less you pay in interest charges over your loan term.

Since cars are depreciating assets, making a down payment also brings the loan value closer to the actual cash value of the car. This means you spend less time with negative equity, where you owe more on your loan than the vehicle is worth. Negative equity can cause some problems if you need to sell or trade in your car for another one.

Does My Down Payment Have to be Cash?

It can be tough to save up thousands of dollars in cash and lenders know this, which is why your down payment doesn't have to be in cash alone. Most down payments can be made in cash, trade-in equity, or a combination of both.

In some cases, a lender may even allow you to put a small portion of your down payment on a credit card, but this isn't recommended as you have to pay interest on the credit card. As a general rule, though, the down payment must be your own money and can't come from a personal loan. Lenders can see other loans on your credit file, and depending on the size of the personal loan, it could even impact the outcome of your financing approval.

Ready to Get Moving on an Auto Loan?

If you're ready to take the next step toward financing a vehicle, start right here at CarsDirect. We can guide you to a local dealership that has the lending resources necessary to help people in many unique credit situations. It's not always easy to find a special financing dealer on your own since they don't often stand apart from the crowd. Don't mess with the stress of trying to go it alone – simply fill out our fast, free, zero-obligation car loan request form and we'll connect you to a dealership that wants to get you driving!

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, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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