It's tough handing over a big chunk of your hard-earned cash to a new or used car dealer when first purchasing the vehicle. It's the painful down payment so many of us dread, which looks to us like we're handing over something all at once that can be added to the car loan. But it's not that simple, and it warrants a closer look at what a down payment does and what our options might be.

With interest, this is not your final number. Keep your payments lower with a down payment.

It's been generally accepted that a good sized down payment is 20 percent of the purchase price of the car. Well, in the 1970s when you could buy a car for a few thousand bucks, that didn't seem like so much, but when the average price of a new car is over $30K, 20% can mean dropping $6,000 as a down payment, when many folks don't even have that much in their bank accounts. reports that the average down payment for both new and used cars in 2015 was around 10 percent, half of what's normally recommended. Much of that has to do with the cost of cars rising faster than household incomes. So, what are your choices?

Assess Your Financial Situation

Unless you're outright buying a car in cash, it behooves you to have a realistic look at your financial situation before you buy a car. Make sure to check your credit report, which you can do annually for free here. If your credit rating is poor or average, you can pretty much count on having to put down some kind of down payment on your new or used car in order to secure financing. If you have a trade-in car of any real value, you can also use the value as your down payment.

If your credit rating is good, you'll likely have to put less money down (or sometimes no money down) because you'll probably qualify for a lower interest rate, saving you a lot of money over the life of the loan. Some lenders won't even lend you money without a down payment, so be aware. 

Put Down What You Can Afford, But Beware

Even though long-term auto loans (over 60 months) will keep your monthly payments down, in the long run, you'll end up paying far more for the car due to the interest rates calculated over such long periods of time. It actually makes more sense to put as much down as you can at the beginning, which will feel difficult, but will reduce your monthly payments without extending the loan period. 

Putting nothing down is not a great idea, since you'll have to pay more out of pocket every month as a result. Right now, it's not out of the norm to put 10% down. On a $30,000 car, that's $3,000. If you're mindful about savings, you'll get over that initial hit because you'll be able to pay less on each monthly payment. Another consideration if you put less than 20% down is that your car will depreciate that much within the first couple of years, so if it gets wrecked or stolen, you're automatically upside down. Think about asking your car insurance company for GAP (guaranteed auto protection) that should cover the difference in case that happens.

Is Zero Down a Viable Option?

Sure, it'd be great to put nothing down, but this basically means you have superb credit to get the lowest interest rate, thereby keeping your monthly payments manageable. This method also keeps the most money in your bank account every month, but it also means you'll pay more interest down the line. Again, some lenders may not give you a loan if you plan on putting absolutely nothing down. 

The ads that say you can put nothing down and also pay zero interest are misleading. Most shoppers won't qualify for this very restrictive financing offer. It's slick marketing to get people in the door to buy a new car. As of 2015, the average credit score for Americans was 695, which is good but not excellent, so most folks wouldn't qualify for the zero down/zero percent interest offer, anyway. 

What if You Have Less-Than-Perfect Credit?

If your credit score is below average, seriously consider putting a decent down payment of 10% or more, which could help you in the loan approval process. This reduces your risk as a borrower in the eyes of the lender. If you do get approved, also try to avoid longer term loans since this will cost you more in the long run. The temptation of lower payments every month is offset by the smart perspective that it will end up costing you more over the long haul. The average loan term is now over six years, which is far too long for a seriously depreciating item like a car.

In the end, it's more about managing your finances well. Just keeping your monthly payments low isn't the best answer since you'll be spending more over time, which can throw off good long-term financial planning. Work on your credit score by paying off credit cards, bills, etc. on time. Come up with a budget and stick to it. And buy a car that's within your means and try to put down as much as you can on the down payment without upsetting your current financial situation. It's all about good planning, really.

Check out financing options for your next new car