How Much Should a Down Payment Be for a Car?
It’s good practice to make a down payment of at least 20% on a new car and 10% for used. A larger down payment can also help you qualify for 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.
- It’s ideal to put down at least 20% on a new car, and 10% on a used car.
- Making a down payment (even if it’s smaller) can help you get a better rate and make it easier to get approved.
- Skipping your down payment can lead to negative consequences like an upside-down car loan.
How much should you put down on a car to get the best deal?
Buying a car is a balancing act. Making a large down payment can work in your favor. But at the same time, you don’t want it to be so big that it causes money problems or forces you to wipe out your emergency fund.
This is where the 20/4/10 rule might help.
The 20/4/10 rule says you should put down at least 20%, and that you should choose an auto loan with a term of four years or less. Also, your total transportation costs (car payment, insurance, gas, etc.) shouldn’t eat more than 10% of your gross monthly income.
The average price for a new car was $49,750 in December 2024, according to Kelley Blue Book. This would mean a 20% down payment of around $9,950.
But what car-buyers actually paid was less. In the fourth quarter of 2024, Edmunds reported that the average down payment on a new car was $6,856. That would be a down payment of just under 14%.
Why a down payment for a car is important
If it sounds too good to be true, it probably is. Buying a car for zero money down is a good example.
A down payment removes some of the lender’s risk and transfers it to you. After all, you’ll lose your down payment if your car gets repossessed. The less risk a lender faces, the better its loans tend to be. Putting money down on a car could lead to…
- Easier loan approvals: Since you’ve got skin in the game, lenders may be willing to work with you even if you have bad credit. In other words, a down payment could get a lender to approve you when you’d otherwise be denied.
- Lower interest rates: Your annual percentage rate (APR) depends on several factors, including how much you borrow. A smaller car loan means the lender will lose less money if you default, so it may “reward” you with a better rate.
- Lower monthly payments: The more you put down on your car, the less you’ll need to finance. The less you need to finance, the lower your monthly payment could be (depending on your term length).
- Less overall interest: The less you finance, the less interest you’ll pay over the life of your loan.
- Lower risk of an upside-down loan: Skipping your down payment means you owe more on your car. You can also expect your car to lose about 20% of its value in its first year due to car depreciation. These two factors are a quick way to get stuck in an upside-down car loan.
“If your down payment is small or if you’re skipping it altogether, think seriously about gap insurance. Gap insurance covers the difference if your car is totalled and you owe more on the loan than the car’s value. I’ve seen too many people have to pay out of pocket to pay off loans on totalled cars.
Remember, your insurance will only cover the current value of your car, not the remaining balance on your loan. Gap insurance is usually under $10 a month, and you can cancel it once you’ve paid enough on your loan to avoid being upside down.”
— Carol Pope, Senior staff writer and licensed car insurance agent
How to calculate a car down payment
To calculate a car down payment, multiply the purchase price by the percentage you plan to put down. For new cars, use 20%, and for used cars, use 10%.
For example, let’s say you’re planning on buying a new car for $34,582. In that case, you should try to put down $6,916.40, or $34,582 x 0.20.
If it’s the other way around and you know how much you can put down but aren’t sure how much car you can afford, use our auto affordability calculator.
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Strategies to boost your car down payment
Find extra money for your down payment with these expert tips.
Take advantage of your trade-in
You might already be planning on applying your trade-in vehicle toward your down payment. Check how much your car is worth and know your trade-in value before going to the dealer. Then, you’ll know to walk away if the dealer proposes a bad deal.
You could also sell your car to a private party and use that money for your down payment. Private party sales tend to get you a higher price than trade-ins do, but finding a buyer can be a hassle.
Look for rebates
Getting your car loan from your car’s manufacturer is called captive financing. Captive financing can come with perks, including rebates.
Some common rebates include those for first responders, military members and recent college graduates. These typically range between $500 and $750 and are usually applied to your down payment.
Even if these don’t apply to you, it doesn’t hurt to ask your dealer if there are any rebates available.
Shop during promotional events
As an incentive, manufacturers will sometimes put cash toward your down payment to earn your business. These promotions typically apply to specific models or model years and are only available during certain times, such as holidays or year-end sales.
However, your choices will be limited when you’re deciding what car to buy. Deals like these only apply to specific model years and models, and only during certain times (like around major holidays or at the end of the year).
Can you buy a car with no down payment?
If you have excellent credit, you might be able to get a manufacturer cash incentive to cover your down payment. Buying a car with no down payment with bad credit is still possible, but it may be harder. Rates will be higher, too (maybe even predatory).
Instead of getting a no-money-down loan from an independent buy here, pay here (with super high rates), you could consider CarMax. CarMax doesn’t have a minimum credit score requirement and it doesn’t require a down payment for most buyers. In the end, though, it’s better to wait and save for a down payment.
Always weigh the benefits and risks before buying a car without a down payment. If you’re not careful, you could end up owing more than what the car is worth.
Frequently asked questions
In a perfect world, you should put $6,000 down on a $30,000 car (20%). Any down payment is better than none, though.
$2,000 might be enough for a down payment on a car, but it might be a little low for a new car. If you’re following the 20/4/10 rule, $2,000 is perfect for a $20,000 used car.
There is no specific minimum down payment for a car. It depends on the car you’re buying, the deal you’re getting and your financial situation. As a general rule, you should try to make at least 20% down on new cars and 10% on used cars.
Depending on how much your car costs, $10,000 is probably a good down payment for a car. Under the 20/4/10 rule, a $10,000 down payment is perfect for a $50,000 new car.
For a used car, $10,000 should generally be an excellent down payment. The average cost of a used car is $25,565, according to Kelley Blue Book. The minimum down payment you should strive for on a car that price is just $2,557.
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- How much should you put down on a car to get the best deal?
- Why a down payment for a car is important
- How to calculate a car down payment
- Compare offers and get banks to compete for your business with LendingTree
- Strategies to boost your car down payment
- Can you buy a car with no down payment?
- Frequently asked questions