How Much Should a Down Payment for a Car Be? (2024) (2024)

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How Much To Put Down on a Car

As a rule of thumb, it’s good to put at least 20% down on a new vehicle. Historically, this has been the down payment size lenders prefer to see. It will also get you the best interest rates.

For a used car, you don’t have to put as much money down up front — 10% is a good down payment in this situation. The difference between down payment amounts for new and used cars comes from depreciation. New cars depreciate quickly within the first year, so lenders prefer more substantial down payments for them.

However, 20% down can be a significant amount of money. According to Kelley Blue Book, the average new car sold for $48,681 in November 2022. A 20% down payment for a car at that price would be $9,736.

If you don’t have 20%, put down whatever you can afford without eliminating your emergency savings. You can even find auto loans for no money down, but they may not come with the best interest rates. Some lenders may require a certain percentage down, like 12% or 9%, so having a smaller amount available may disqualify you from some auto loans.

Benefits of Making a Larger Down Payment

Try to put as much down as you can. This money goes directly to paying down the cost of the car, so you’ll have a smaller auto loan. Here are other benefits of making a larger down payment:

  • Lowering your monthly payment
  • Reducing the chance of being upside down on your car loan
  • Lowering your loan-to-value (LTV) ratio

Lower Monthly Payment

With a larger car down payment, you’ll reduce the total loan amount and monthly payment if other terms stay the same. The table below shows what your monthly payment on a $20,000 vehicle would be if you put $2,000 down compared to $4,000. We’ll use a 60-month loan term and a 5% interest rate in this example.

10% Down Payment20% Down Payment
Vehicle cost$20,000$20,000
Down payment$2,000$4,000
Loan amount$18,000$16,000
Loan term60 months60 months
Interest rate5%5%
Monthly payment$339.68$301.94
Total interest paid$2,380.93$2,116.38

Pay the Loan off Faster

You can also use a higher down payment to get a shorter loan term and pay your car loan off faster. In the example above, let’s say you got a 48-month loan instead. With a down payment of $4,000, you’d pay $368.47 per month, but you’d finish the loan 12 months sooner and pay less interest.

Being able to have a shorter loan term could get you a better rate, which would save you even more on interest.

Avoid Being Upside Down on the Loan

Another benefit of making a larger down payment is that it reduces the likelihood you’ll be upside down on the loan. With an upside-down car loan, you owe more than the car is worth. If you don’t put anything down at all, you’ll almost definitely be upside-down on your loan.

Let’s say you put $1,000 down on a $20,000 vehicle and finance $19,000 of the sticker price. With a 5% interest rate and a 60-month term, you’d owe $15,569.45 at the end of the first year. If your car were now worth less than that, you’d be upside down on your loan.

Lower LTV Ratio

As you seek to qualify for a loan, one thing lenders consider is the LTV ratio. The bigger your down payment, the lower your LTV ratio (which is good). To find your LTV ratio, divide the loan amount by the car’s value. As a basic example, the LTV ratio of an $18,000 loan on a $20,000 vehicle would be 90%.

An LTV ratio below 100% is best, though lenders may approve LTV ratios of up to 125%. This would happen if you trade in a vehicle with negative equity. You might need excellent credit or a shorter loan term to borrow with a high LTV ratio, or you might only find a bad-credit lender that gives you a horrible interest rate and a long payoff period. A down payment on a car can help you avoid this situation.

Better Chance of Approval

Because a down payment reduces your LTV ratio and can keep you right side up on a loan, it gives you a better chance of being approved for financing. A good down payment makes you less of a risk for lenders.

What If You Can’t Put Much Down?

Putting something down is better than nothing. Even if you can only afford $500, make that the down payment on your car.

If you can’t put a decent amount of money down, your lender may require gap insurance. This covers the difference between the value of your car and what you still owe on your loan if your car gets totaled or stolen. Your auto insurance company would only cover the value of the car, so gap insurance gives the lender extra security.

Avoid Bad-Credit Car Loans

If you can’t put much money down, you might only qualify for bad-credit car loans. In this case, you want to avoid paying full price for a new vehicle. Instead, opt for a reliable used model to limit the loan amount.

Also, avoid using “buy-here, pay-here” car dealerships. These dealers offer in-house financing options and will work with almost anyone, including those with low credit scores or no credit. This means they lend to people who have a higher likelihood of default and nonpayment. Buy-here, pay-here dealerships charge higher interest rates to compensate for this, and some may even charge the maximum rate allowed in your state.

Without a down payment or decent credit, you may only find loans with high interest rates or long terms. You’ll pay more over the life of the loan than the car is worth, and you’ll risk being in debt if it gets totaled.

Consider a Trade-In Vehicle

If your car purchase includes a trade-in with a positive value, you can use the trade-in value as a down payment toward the purchase price of the next vehicle. But that only works if you own the trade-in car outright or owe less on the loan than the car’s value. If you owe more than the car is worth, you have negative equity in the vehicle and won’t be able to use it for a down payment.

How Much Down Payment for a Car: Conclusion

A down payment of 20% for a new car or 10% for a used car is ideal, though any size down payment will reduce your total loan cost. If you only have so much to spend, choose a vehicle budget that will get you closer to the ideal down payment amount.

Our Recommendations for Auto Loans

Once you know how much you’re able to spend on a down payment, the next step is choosing the right lender. You have many more options besides the dealership’s financing. We recommend getting prequalifications from a few lenders before negotiating costs at the dealership. Our top picks include myAutoloan and Consumers Credit Union.

MyAutoloan: Best Low-Rate Option

MyAutoloan is our first recommendation for financing both new and used vehicles. The company works with a wide range of lending institutions to offer low rates, especially for highly qualified borrowers with good credit. If you decide refinancing is a better option than buying a new car right now, consider myAutoloan’s refinance auto loans.

Consumers Credit Union: Most Flexible Terms

If a credit union is more your style, we recommend checking out Consumers Credit Union. It can work with a variety of credit types. The credit union also offers members a rate discount of 0.25% for making automatic loan payments.

How Much Down Payment for a Car: FAQ

Consider putting at least $6,000 down on a $30,000 car if you’re buying it new or at least $3,000 if you’re buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

Generally speaking, you should try to put at least 20% down on a new car or at least 10% down on a used car. This will help you find the best loan terms. It will also reduce the loan amount and the likelihood of owing more than your car is worth.

For a $25,000 car, consider putting down at least $2,500 if it’s used or at least $5,000 if it’s new. By putting 10% or 20% down depending on the car’s condition, you’ll have the best options for loan terms and interest rates.

Some auto loan lenders don’t require down payments, but their loans typically come with high interest rates. Many other lenders have minimum down payment percentages, often ranging from 9% to 12%. If a down payment that’s at least 9% of a car’s value is too much for you, you may need to consider a cheaper car.

Putting a large down payment on a car reduces your monthly loan payment and helps you find lower interest rates. You can also pay your car loan off early if you’re okay with a higher monthly car payment.

Our Methodology

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

Here are the factors our ratings take into account:

  • Reputation: Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
  • Rates: Auto loan providers with low APRs and high loan amounts scored highest in this category.
  • Availability: Companies that cover a variety of circ*mstances are more likely to meet consumer needs.
  • Customer experience: This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness, friendliness and helpfulness of each warranty company’s customer service team based on our shopper analysis.

Our credentials:

  • 300+ hours researched
  • 25 companies reviewed
  • 2,000+ consumers surveyed

*Data accurate at time of publication.

If you have questions about this page, please reach out to our editors at

How Much Should a Down Payment for a Car Be? (2024) (8)

Daniel RobinsonWriter

Daniel is a MarketWatch Guides team writer and has written for numerous automotive news sites and marketing firms across the U.S., U.K., and Australia, specializing in auto finance and car care topics. Daniel is a MarketWatch Guides team authority on auto insurance, loans, warranty options, auto services and more.

How Much Should a Down Payment for a Car Be? (2024) (9)

Rashawn MitchnerManaging Editor

Rashawn Mitchner is a MarketWatch Guides team editor with over 10 years of experience covering personal finance and insurance topics.

How Much Should a Down Payment for a Car Be? (2024) (2024)


How Much Should a Down Payment for a Car Be? (2024)? ›

In early 2024, the average price of a new car was $47,000, meaning a 20% down payment would be $9,400. For used cars, the average price surpassed $25,000, so 10% down would be $2,500. These down payment amounts can include cash, the value of a trade-in or both.

Is $3,000 enough for a down payment on a car? ›

Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

Is $2000 enough for a down payment on a car? ›

How much should you put down on a car? A down payment between 10 to 20 percent of the vehicle price is the general recommendation. But if you can afford a larger down payment, you can save even more money on interest payments over the life of the loan.

What is a realistic down payment for a car? ›

The typical down payment on a car ranges from 11% to 20% of the car's value. The credit bureau Experian says a 20% down payment might help shield you from depreciation. Depreciation refers to the ever-shrinking value of your car. The value of a new car declines about 20% in just the first year.

Is $7,000 a good down payment for a car? ›

Average car loan down payment

In the second quarter of 2023, the average down payment on a new vehicle was nearly $7,000, according to Edmunds. The average down payment on used vehicles was lower at $4,107 during the same period.

Is a 500 dollar car payment too much? ›

How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.

What credit score is needed to buy a car? ›

The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.

What is a good credit score to buy a car with no down payment? ›

Your credit score is crucial to determine your eligibility for a no down payment car loan. Most lenders require a FICO credit score of at least 680 before you can qualify. If your credit score falls below 680, improve your credit score before you apply to help you qualify in the future.

What are the disadvantages of a large down payment on a car? ›

Disadvantages of a Larger Down Payment

The two biggest cons of making a down payment that's around 50 percent are: More money down doesn't lower your interest rate – Bad credit car buyers get higher than average interest rates, and it's extremely rare that a larger down payment can lower it.

Is it bad to put too much down payment on a car? ›

Because of the financial advantages, the more you can put down on a car the better. The best approach is to put 20% or more down on a new car and at least 10% on a used car if you can afford it.

Does 15 USC 1662 B mean no down payment? ›

15 USC 1662 states that no advertisem*nt concerning consumer credit may state that a specified down payment amount is required in connection with the extension of consumer credit unless the creditor usually and customarily arranges down payments in that amount.

Can I use my credit card for a down payment on a car? ›

Can you use a credit card for a car down payment? Putting a car down payment on a credit card is an option that many dealers are open to. Dealers may be more willing to allow this type of payment for the total amount, or a partial amount, of your car's down payment.

Is it better to put money down on a car or pay extra principal? ›

More equity starting out

Putting down a larger down payment will increase your equity because you won't need to finance as much through a lender. Cars are a depreciating asset. As the value of your vehicle decreases, you're more likely to go upside down on your loan — when you owe more than your car is worth.

Is it smart to put money down on a car? ›

It's good practice to make a down payment of at least 20% on a new car (10% for used). A larger down payment can also help you nab a better interest rate. But how much a down payment should be for a car isn't black and white. If you can't afford 10% or 20%, the best down payment is the one you can afford.

How much should you put down on a $24 000 car? ›

As a general rule, you should pay 20 percent of the price of the vehicle as a down payment. That's because vehicles lose value, or depreciate, rapidly. If you make a small down payment or no down payment, you can end up owing more on your auto loan than your car or SUV is worth.

How to make a large down payment on a car? ›

Use a money order or electronic funds transfer (ETF): Because most dealerships won't accept a large down payment in physical cash, consider using a money order to certify the funds or have your bank transfer them electronically.

How much is a downpayment on a 20k car? ›

If your credit score isn't good, however, you're typically required to make a down payment of at least $1,000 or 10% of the vehicle's selling price. This varies by lender, and some may accept the lesser amount. On a $20,000 car, that would be up to $2,000 down.

Is it worth it to put a big down payment on a car? ›

A larger down payment can show lenders you are serious, which in turn can help you get the best auto loan rate. Experts tend to recommend putting down 20 percent or more on the vehicle.

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