It can happen to anyone. Your car breaks down (for the 4th time this year) and the repair estimate makes your eyes water a little. Or maybe you were getting rides from a buddy who suddenly stopped picking you up and hasn’t returned your calls in 2 days. Either way, sometimes you just can’t put off a car purchase any longer. Without planning or budgeting for such a major expense, handing over a large chunk of cash for a car down payment can be unrealistic.

Cars in rows in dealership

We often get the question “can I get a car loan with no down payment?”. Yes, in certain cases it is possible to get a loan with no down payment, but it can be a challenge. The car loan terms will likely also be less attractive. To help you choose the best course of action, we’ll give you the 411 on car down payments and some practical tips to consider when car shopping.

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The Purpose of a Car Down Payment

Salesperson reviews car down payment

Let’s first look at the benefits and purpose of a down payment. When financing a car, it is recommended to put some money down at purchase. There are several reasons this is advised for car buyers. First, you are likely to get a lower interest rate on your car loan. This means you’ll be paying less over the lifetime of the loan. Also, a down payment gives the lender confidence that the buyer has the funds to pay off the loan in a timely manner. Even if your credit score isn’t perfect, when you make a down payment, you can expect smaller monthly payments and owe less overall.

The Average Down Payment

The widely recommended down payment for a new car is 20% of the car’s purchase price. However, the average down payment across both new and used cars is only half of that at 10%. This doesn’t come as a surprise since new car prices have skyrocketed by almost 4% since last year. According to KBB.com, the average price for a new car comes in at a whopping $36,270! 

Don’t worry about pulling up the phone calculators, we got ours out already:

  • A 20% down payment on the average new car is $7,254
  • A 10% down payment will require you to come up with $3,627

That’s not what we’d consider pocket change!

So, What Are My Options?

Women Looking at Used Car

Just because you can’t come up with the recommended down payment, doesn’t mean all hope for a car is lost. Start by picking a car that will fit into your budget. If the car you’re considering requires a high down payment and the monthly payments also seem too high, you’re better off saving up or looking into a less expensive car.

3 Simple Tips for Tackling the Car Down Payment

Tip 1: Buy Used Instead

If you were looking into buying a new car, consider going with a used car instead. There are many options for reliable and safe used cars that will make the down payment much more reasonable. You also won’t need to worry about depreciation the same way you would with a brand new car.

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Tip 2: Use Your Trade-In or Rebate

If you own a car now, you will be able to use your trade-in value towards the down payment of the new car. The value of your trade-in will be negotiated with you at the dealership. You can also apply the rebate for the new car (if there is one available) towards the down payment.

Tip 3: Find a Cosigner

If your credit score isn’t great, getting a car loan on your own without a down payment will be difficult. Finding a cosigner with good credit to sign the car loan with you will improve your chances of getting approved.

Choosing a less expensive car and shopping around for auto financing will improve your chances of being approved for a loan with a small down payment or no down payment at all. Just make sure the interest rate and monthly payments for the loan will fit into your budget.

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