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3 min read published October 20, 2022

Written by Allison Martin Written by Allison Martin’s work started over 10 years ago as a digital content strategist. She’s been featured in a variety of top financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances with concise, well-researched and well-studied information that is broken down into complicated subjects into digestible pieces. The Bankrate guarantee

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This compensation could impact how, where and in what order products appear in listing categories, except where prohibited by law. We also offer credit, mortgage, and other home lending products. Other factors, such as our own website rules and whether the product is available in your region or within your self-selected credit score range can also impact the way and place products are listed on this site. We strive to provide the most diverse selection of products, Bankrate does not include specific information on every financial or credit item or product. Prices for used and new cars have risen dramatically, forcing people to settle for greater monthly installments. A lot of people are digging into their savings accounts in order to save . But how much will you need to invest to secure a ? Many financial experts suggest 10-20. It’s important that you assess your financial situation and come up with a figure that works for your budget. A typical down payment on a car loan cost in the beginning of 2022 the average down payment on a new vehicle was , according to Edmunds. This is an increase of 27 percent compared to one year ago, which is also the largest it has ever been. The average down payment on used vehicles was less at $3,574 during the same period. Yet, it’s 7 percent more than it was last year. Given current market conditions rising down payments shouldn’t come as unusual. Used and new vehicle prices also reached record levels in the beginning period of the year 2022. Average auto loan amounts were $30,830 and $39,340 for used and new cars in the first quarter, respectively, as compared with $35,040 or $23,958 in the fourth quarter of 2021. How much should a car down amount be? Financial experts suggest an amount of at minimum 20 percent when financing the purchase of a . This is steep for many, especially when coupled with the recent increase in used and new vehicle prices. For example, a 20% down payment on a $35,000 vehicle is $7,000. Still, there are benefits for putting this amount down. You could boost the odds of getting approved and qualify for better interest rates. Plus, your monthly payments will be lower and you’ll pay less in interest over the life for the loan. In the event that you’ve got a substantial amount of savings, placing this amount down may not be a problem. In other cases, it’s not worth depleting your savings account in order to make a down payment. It is also possible to achieve the suggested 20 percent down payment. If not, try to get 10 percent as this amount is still acceptable to most lenders. Only put down the amount you are able to comfortably afford. What can I do to purchase a car without a down amount? Some dealers will approve you for financing with a low or zero down payments, contingent on your credit history- but these loans generally carry higher interest. If you’re lucky enough to qualify for an unsecured loan, without the need to make a deposit then it might be an unwise choice. You can invest the money to increase your wealth instead of using it for the down amount. These loans generally require good credit. Still, there’s a significant danger to be aware of. If your car is destroyed and you don’t have the funds, you could be required to pay to settle the difference between what the insurance company will pay your lender and the amount you have to pay. How do you determine a down payment Bankrate’s estimates can help you determine the potential savings you could make by placing cash down or trading the vehicle you have. You’ll need the purchase cost, loan term, interest rate, the tax rate (federal and local) as well as the minimum and maximum amount of your down payment to get started. To illustrate, assume you’re approved for a 4 year $25,000 auto loan with a rate of 6 percent. You you can deposit between $2500 (or 10 percent) or $4,000 (or 16 percent) down. This is how you can use the calculator: Step 1: Enter $4,000 and $2,500 in the minimum and maximum down box for payments. Step 2: Input an amount of purchase of $25,000, the loan term of 48 months and the annual interest of 6 per cent in the boxes marked. Step 3: Enter the amount you think you could earn on the down payment, if you were to invest it instead. In this case, you can use 3 percent. Step 4: Enter the federal and state tax rates. Apply 7 percent to this scenario. Based on these numbers the monthly installment for a down payment of $2,500 is $528.41 as compared to $493.41 with the $4,000 down payment. With a higher down payment it would save you $109.86 per month, or $3,773.28 over the life of your loan. The reason why a down payment is crucial Besides the significant savings in cost and lower monthly installments, here are some additional advantages you should consider a down payment: Better loan conditions: A greater down payment amount can potentially qualify you for , typically in the form of a lower interest rate. Increased equity: You’ll be starting having equity within your vehicle when you pay a down payment, which means you’ll owe less than what the car is worth. This protects you from being required to pay for the remainder if you decide to sell your vehicle or trade it in after taking off the loan. Next steps Even though the typical vehicle loan down payment is rising but you’re not completely in a position to make a decision if you do not have a lot of money. Aim for a down payment of at least 10 or find an lender willing to settle for lower amounts if you’re not able to pay this amount. Bring something to the table. Even a small downpayment could help you get an auto loan with fair terms and minimize the chances of owing more than your car is worth in the early loan term. Make use of our calculator for down payments before car shopping to determine the right price points to match your preferred down payment amount. Learn more


Allison Martin’s work began more than 10 years ago as a digital content strategist, and since then she’s been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances with clear, well-researched information that breaks down otherwise complex topics into manageable bites.

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