How Much Of A Down Payment Do I Need?

How much money is the ideal down payment for a car? Just like many of the pressing financial questions in life…it depends.  It depends on the size of the purchase.  It depends on the financing options.  It depends on your credit score.  It depends on the car dealer.


For a home loan, the number is 10 to 20 percent down. The higher the down, the lower the interest rate.  If you are eying up a new or used car, the answer is not so simple.

When buying a new vehicle from a franchise dealer, the number is similar to a mortgage. 10% should get you in the door, according to  Obviously, seasonal promotions, sales, and credit requirements can change that.

But what if you are visiting a buy here, pay here dealership? The answer is even less obvious.  The required down payment can vary with the value of the car, how long it has been on the lot, your credit history, how close you are to tax refund season, your part of the country, and once again, seasonal promotions.

According to many of the car dealers within the Drive Now Network, the number can range from zero down to $2,000 or $3,000. One dealership that you can be partnered with on reports that they ask for a $750 average down payment and actually GET an average of $400.  Others have an average of $600.

When visiting with dealers around the United States, I will occasionally hear that their average down payment is closer to $1,000 during the year and $2,000 in February when tax refunds arrive and more money is available.

At the end of the day, it is YOUR question to answer. How much can you afford to put down without causing financial strain?

Other factors to consider include your desired loan payment amount. The more you put down, the less you have to pay every week, 2 weeks, or every month.  How soon do you want to eliminate your loan payment obligation?

The last factor to think about is how much is your interest rate? If you have a low interest rate, 0.9 or 2.9% for example, you may consider a deliberately low down payment.  The loan is cheap, so why not keep the money you have today and extend the loan an extra year.


Now, if your have a high interest rate in the 14.9%, 19.9%, or 24% range…MAXIMIZE your down payment. Get that loan paid off as soon as humanly possible.

It would also be wise to make sure EVERY payment is on time! After 6, 12, or 18 months, you can approach a Credit Union to refinance at a much lower rate.  But that only works if you are working successfully to increase your credit score.