How Much Should My Car Down Payment Be

You know it’s time to buy a new car. Ol’ Bessie is sputtering at every turn and you’ve been saving up for what feels like a decade. But how do you know if you have enough cash saved up to buy a car? Most folks will say you should make a down payment that’s at least 20% of the vehicle purchase price, but you might be able to get away with a different amount. Learn more about car loan down payments and how to choose the amount that’s best for you.

blog image

The Lowdown on Car Loan Down Payments

Unless you have enough cash on hand to pay for a car outright, you’ll need auto financing. Most people do! Financing helps you buy a vehicle and then pay for it over a period of time. Your down payment is the amount of cash you pay, upfront, to buy the vehicle.

Your down payment is an important part of the auto financing process, since it:

  • Reduces the amount of the loan you need to buy a car
  • Reduces the amount owed in case the lender has to repossess the car
  • Could increase your chances of being approved for a car loan
  • Could help you secure a lower interest rate and better terms for your loan
  • Can help lower your monthly payment and total amount paid
  • Provides you with equity in your vehicle
  • Could help you qualify for a more expensive, higher end car

What is a Good Down Payment?

Many experts advise putting down 20%, but this isn’t a hard and fast rule. The amount of money you put down will vary depending on a variety of factors, including:

  • Your credit profile: This is the most important factor in determining how much money you should put down for a car. If you have an exceptional credit history, you may be able to get away with a small down payment or find yourself eligible for one of the coveted “zero down payment” offers. If you have bad credit or no credit, you may be required to make a higher down payment.
  • The price of the vehicle: The pricier the car, the more you will usually need to put down. Then again, if you have an exceptional credit score, you may be able to go with a lower down payment. Your credit profile still reigns as one of the most important factors in determining your down payment amount.
  • Your desired monthly payment: The more money you put down, the less you will need to borrow. The less you borrow, the lower your monthly payments will be! Play around with myAutoloan’s Advanced Auto Loan Payment Calculator to see how your down payment plays into your monthly payment.

Run the numbers early on to give yourself a clear savings goal to work toward. To get an idea of what these numbers look like in real life, check out the table below. It offers a quick look at various vehicle prices, down payment amounts, and the resulting auto financing you’d need in order to purchase the vehicle.

Down Payment Quick Look Table
Vehicle Price Percent of Vehicle Price Down Payment Amount Amount Financed
$10,000 10% $1,000 $9,000
$15,000 10% $1,500 $13,500
$20,000 10% $2,000 $18,000
$25,000 10% $2,500 $22,500
$30,000 10% $3,000 $27,000
$10,000 20% $2,000 $8,000
$15,000 20% $3,000 $12,000
$20,000 20% $4,000 $$16,000
$25,000 20% $5,000 $20,000
$30,000 20% $6,000 $24,000

In the end, how much money you put down to buy a car is up to you. Down payment amounts will vary from driver to driver. Use myAutoloan loan calculators and interest rate estimators to get a better idea of where you stand. Then apply for an auto loan the fast and easy way! Submit one application and view up to four loan offers in minutes!

Bad Credit Won’t Stop You From Getting an Auto Loan

It is possible for anyone to have a low credit score.  In many cases, an unexpected job loss or medical expense makes it difficult to keep up with mortgage, student loan or other debt payments. However, this shouldn’t automatically disqualify you from getting reliable and affordable transportation.

blog image

We Work With Everyone Who Needs Financing

Whether you have great, average, bad or subprime credit, we can help you get the financing that you need in a timely manner. When you apply for an auto loan with us, we will return up to four different offers from national lenders that you can compare at your own pace.  Once you decide on a loan offer that fits your needs, you can finish the application process by choosing a lender that is direct to you and get the vehicle that you want or need.  Having choice is a huge benefit that can’t be overlooked.

We Look at You As a Person Instead of a Number

Your credit score is one of the most important numbers that a lender looks at when determining who to lend to.  However, our lenders all realize that you are more than just your credit score.  No one chooses to get sick or chooses to get laid off by their employer. Bad things happen to good people, and that is just a fact of life.  Furthermore, no one can predict when they will need to see a dentist or when the roof of their home will start to leak.  When you work with a direct to consumer loan provider, like myAutoloan.com, you are treated like a person who needs help to get past any prior unfortunate circumstances.

Pay Less With a Direct to Consumer Loan

When you work with a dealer or other middleman to get an auto loan, you can be sure that there is going to be markup.   You could be charged origination fees, document fees and any other fee that the dealer or other third-party can pass along to you.  This could add hundreds or thousands of dollars to your loan, which could make it harder to pay off in a reasonable amount of time.  Going direct to a work with a lender is the least expensive way to get a car loan.  Check out our calculator to see what you could afford.

Start to Rebuild Your Credit With a Bad Credit Auto Loan

A bad credit auto loan can help you get back on the path to having a good credit score.  When you make a payment, it is reported to credit agencies.  If you can string together multiple on-time payments, your score could go up to by 100 to 200 points in a matter of months.  The exact increase to your score depends on what your credit profile was when you first took out the loan.  However, as a general rule, most lenders pay the most attention to credit activity that has taken place in the last 12-24 months.  So get going and make things happen for yourself – good things buy being on time with your payments and see what happens!

There are many reasons why your credit score is lower than you would like it to be that have nothing to do with irresponsible spending habits.  By working with a direct to consumer loan provider that has multiple platform based lenders, you can get the car that you want at a price that you can afford regardless of your credit score.

Does Shopping for Car Loans Hurt My Credit?

If you’re fearful that a car loan application will hurt your credit score, then this is the blog for you. Follow along as we explain how the top three credit reporting agencies typically roll multiple auto inquiries into one inquiry on a continuous, 14-30 day cycle, and why applying for a car loan typically won’t hurt your credit.

blog image

Car Loan Shopping Doesn’t Hurt Credit

While shopping for credit can sometimes signal bad news bears to creditors (i.e higher risk), most credit scores aren’t drastically impacted by multiple inquiries from auto lenders within a short period of time.

The top three credit reporting agencies (TransUnion, Experian, and Equifax) understand that people are typically going to shop around when searching for the right auto, home, or student loan. After all, not all financing companies and loan offers are created equal! Shoppers may find varying interest rates and payment plans depending on where they go and when they apply. It’s all about finding the right loan offer for you and sometimes, it takes more than one loan offer to get there.

Lenders also know that you’re probably not trying to buy multiple homes or cars–you’re just trying to find the best rates and terms. Credit scoring systems have evolved over time to reflect this reality.

But You May See Multiple Inquiries on Your Credit Report

While your credit score isn’t likely to take a hit when applying for car loans, you may notice multiple inquiries on your credit report. Each time your credit report is reviewed by a different lender, an inquiry will appear showing who accessed the report and why. This is technically called an “inquiry,” though you may also hear “check” or “pull.”

Inquiries include information about who’s making the inquiry, what it’s for, the date it’s made, and the type of inquiry.

Experian, for one, will list each inquiry that is made in your file for two years, but these inquiries will only be counted as one inquiry when calculating your credit score.

That said, you want to apply for credit wisely. Don’t spread out your loan applications over a long period of time, as this will spread out the credit inquiries, too. As long as inquiries are made within about 14 days, they are counted as just one when your credit score is calculated. Space them out too much and you run the risk of having them be counted as separate inquiries.

And Certain Inquiries CAN Impact Your Credit Rating

A single hard credit inquiry typically won’t play a major role in whether or not you’re approved for financing. Lenders understand that most people compare loan options when buying something as big a house or car.

Still, it’s not a good idea to apply for a bunch of different credit cards and loans at one time. Multiple hard inquiries for different types of credit in a short period of time can signal to lenders that you’re in a financial pickle. They may assume you’re having trouble paying bills, getting ready to rack up debt, or that you’re short on cash—all signs that you could be a risky loan recipient.

Examples of hard inquiries include applications for a mortgage, auto loan, credit card, student loan, personal loan, or apartment rental credit checks.

The lesson? Only shop for one type of loan at a time and don’t drag out your financing applications over a long period of time. If your credit has been hurt in the past, work to build a healthier credit score by paying your bills on time, having a low balance on your credit card, maintaining a long credit history, and applying for new credit sparingly.

Go the Easy Route, with myAutoloan

myAutoloan is one of the fastest routes to smart auto financing. There’s no need to submit multiple applications in order to view multiple offers, and no need to navigate to different websites. Just submit one application and view up to four offers in a matter of minutes. Our applications are free, fast, and easy, and we’ll never pressure you to use one of our lenders’ offers or loans. Apply worry-free to buy the car you want. When you have nothing to lose, why wait?