If you’re one of the many out there looking to finance a new car than to buy one with cash, you might be wondering how much money you have to put down.

The key to a down payment is to put down as much as you can afford without going broke if you’re buying a car. If you’re leasing a car you’ll want to put down as little as you can to make the payment reasonable.

Reasons to Make a Car Down Payment

There are several reasons to make a car down payment and each person will have their own. In some cases most just accept a down payment as the “cost of doing business” and pay it without understanding where the down payment goes.


A car down payment can help you secure a car loan or lease.


A few other reasons why you should consider making a down payment on your next car loan:

  • You will pay less interest overall.
  • It may improve your approval odds.
  • You will lower your monthly payment the more you put down.
  • You might qualify for special programs.
  • You can offset depreciation.

How Much Should Your Car Down Payment Be?

The only person that can truly answer this question is you. However, we suggest putting down as much as you can without hurting yourself financially or putting yourself in any financial hardship.


The more you can put down means the less you’ll have to pay overall and the faster you will be out of debt, which is the ultimate goal.


Your credit score plays a major role in how much you’ll have to put down. You should make sure you pull a credit report and clean up any negative marks by repairing your credit before you consider buying. If you have bad credit you can expect to put down at least 10% of the value of the car before you’ll get approved for a loan.


You should try to put down around 20%, or more, if you’re purchasing the car. This will help you keep the car from going immediately underwater and can offset depreciation quite a bit. A used car may come with a lower down payment requirement than a new car.

In many cases you can trade in your car as a down payment to lower your overall out-the-door cost. You’ll have to be careful and make sure you’re getting the most for your trade-in.

Down Payment Backups

Not everyone can afford a down payment. We encourage you to do so as you can but if you can’t come up with the cash there are a few other options you should look into to protect your investment.


You should look to have gap insurance. This will protect you in the event something happens to the car and you won’t have to come up with the difference between the market value of the car and the debt owed.


You should look at new-car-replacement coverage. This insurance allows you to replace a new car that’s totaled with a new one of the same make, model and equipment. You’re basically getting a carbon copy of your car for a monthly premium.


Consider buying a less expensive car. By looking at cars that are cheaper you’re ultimately spending less in the long run which means a lower monthly payment. Cheaper cars tend to come with less requirements which means less money up front.


Find a co-signer. This will be pretty hard if you don’t have any friends or family that will sign for a large purchase for you. A co-signer agrees to share responsibility for the loan with you and dramatically reduces the risk by the lender which often almost guarantees loan approval.