How big should my car deposit be?


    Whether you are buying a new or used car, or financing the purchase, you have the option of paying a down payment on a car. A down payment reduces the total amount you owe for the car, although a good down payment for a car depends on the total purchase price of the car.

    Loan partner

    Minimum. loan

    Fixed APR

    Eligible degrees

    However, not all lenders require a down payment. Many used car dealers advertise “no money down” deals, and you might think it would be great to have some cash in your pocket. But not so fast. Here’s why you should be wondering how much to bet on a car, rather than how little.

    Why pay a deposit?

    When deciding how much to spend on a car, consider these benefits of a down payment. To get access to the best car loans, you will need to have a good credit score or a substantial down payment.

    If you buy a $ 15,000 car and spend $ 5,000, your monthly car payment will be less than if you funded the full amount. If you’re someone whose monthly cash flow varies or who is struggling to stay on a budget, this might be a good choice. Paying a larger percentage of the total price as a deposit will help you a lot in the long run.

    It helps to secure a loan with low credit

    The lower your credit score, the more you pay for access to credit. If you have a credit score below 600, your car loan will come with a high interest rate. Before you go to a dealer, find a lender who specializes in auto loans with bad credit if your credit score is below 600.

    A good down payment on a car reassures lenders that you are serious about the purchase and that you will make payments. It also reduces their risk as they don’t lend that much for the vehicle. A reduced risk, in turn, lowers your interest rate.

    That makes financing easier

    Cars lose value as soon as you leave the parking lot. If the vehicle is 100% funded and you then default on the loan, the lender would now have to take back an asset that has depreciated. You may not be able to sell it for all of your loan amount and make up for your losses.
    When you are ready to pay a deposit on the car, the financing process becomes easier and faster. The lender takes less risk when you deposit money.

    It offsets the depreciation

    Cars lose value rapidly in the first few years they are owned. When you buy a new car, it immediately loses value. This could lead to a void in your insurance.

    That gap is the difference between what you owe the car and what it’s worth when it is added together in an accident. Without a down payment, you could owe the lender money on a now worthless car. If you are deeply concerned about this fact, speak to your insurance agent about getting gap insurance.

    This could help qualify for special funding

    Some dealers offer special financing agreements through the dealership. The deal can take a few months without making a payment or lowering interest rates. However, often you will have to pay more than the minimum deposit to qualify for these.

    How much should you bet on a car?

    Again, a good down payment for a car depends on your circumstances. If you are trying to make up for a low credit score, investing more money would be a good idea.

    For a used car, it is enough to lower 10% of the sales price of the car. When buying a new car, lenders may want a larger down payment to offset the depreciation. In this case your best deposit could be 20%.

    Renters may not have a choice about the minimum deposit for a car. The rental terms and conditions often state how much you need to write down. Since you will never get this money back and you will not own the asset at the end of the lease term, it is not recommended that you pay more than this amount.

    Before heading onto a dealer’s property, check your bank account to see how much you can afford to park a car. Check your balance so you have an idea of ​​the interest rates on offer. That way, you’ll be more willing to negotiate with the dealer.

    Then think about the term of the loan you will be applying for in financing. If you opt for a shorter loan term of 24 to 36 months, the monthly payment amounts will be offset by a higher down payment.

    Car loan terms longer than 48 or 60 months may not require as large a down payment as the amount is split over several months and is therefore less. The length of your car loan is a very important thing to consider before even thinking about going to the dealer.

    Ultimately, the best down payment for a car is one that provides affordable payment and a reasonable interest rate.

    Down payment alternatives

    A trade-in is one of the best alternatives to a deposit. If you currently drive a vehicle that still has some value, you can trade it in with the dealer to reduce the amount you owe on your new car. Once you’ve decided on a consensual value for your trade-in, that amount will be deducted from your new car loan.

    Cash discounts on purchases are another alternative to paying a deposit. If a dealer offers a cash discount, it is automatically deducted from the purchase price of the car. When leasing a new car, discounts go to the lender.

    There is no clear answer to the question, “What is the minimum deposit for a car?” The best answer will take a number of factors into account to determine the best deposit for your situation, such as: B. Your creditworthiness, the selling price of the car and the amount of your monthly payment. Take all of this into account when deciding how much to bet on your new car.

    We appreciate your feedback on this article. Contact us at with comments or questions.


    Please enter your comment!
    Please enter your name here