Do You Need a Down Payment on a Bad Credit Auto Loan?

Yes, you usually need a down payment on a bad credit auto loan. Each lender has their own specific down payment requirements you need to meet. While we can’t tell you exactly how much you need to put down, we can give you an idea of what to expect, and explain how different lenders set their down payment requirements.

Down Payment Requirements by Lender

Do You Need a Down Payment on a Bad Credit Auto Loan?Bad credit car buyers can typically expect to work with one of two types of lenders: subprime lenders that work through special finance dealerships, and buy here pay here dealers, who are also lenders. Both have specific down payment requirements you need to meet, and they vary.

Let’s take a look at what these dealerships generally ask for:

  • Subprime lenders – Usually require a down payment of at least 10% of the vehicle’s selling price or $1,000, whichever is less.
  • Buy here pay here dealers – These dealerships base the down payment requirement on the price of the car you choose, so it can vary widely.

When coming up with a down payment, you can use trade-in equity, cash, or a combination of both.

The Larger the Down Payment, the Better

You could make the minimum down payment and be OK, but if you can, we recommend you make a larger one if you have bad credit. The reason why is because you save on the overall cost of the auto loan. Let’s check out an example:

Laura wants to buy a car, and has a low credit score of 580. She plans on financing a vehicle with a selling price of $16,000, at an interest rate of 12%, for 60 months. She has a trade-in appraised at $4,000 that she can use toward the down payment requirement.

Without adding in tax, title, and license fees, here’s what her car loan would look like with different down payment amounts:

 Down Payment 

 Monthly Payment 

 Total Interest Paid 




$1,000 (typical minimum)



$4,000 (trade-in)



$5,000 (trade-in plus $1,000)



If she decides to use her trade-in as a down payment, she saves a little over $1,300 in total interest paid compared to not having any money down, and her monthly payment decreases by $89. If she adds more cash, she saves even more.

Ready to Get a Car Loan?

Now that you know that you typically need a down payment on a bad credit auto loan, are you ready to take the next step and find a dealer to work with? If so, we’ve got you covered.

At The Car Connection, we want to connect you to a local dealership that knows how to work through unique credit situations. What are you waiting for? Get started right now by filling out our car loan request form.

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