When you have poor credit, a down payment is not only a requirement but a great idea, too. You can knock down your cost by making a large down payment, but can you still get a car with a low down payment?
What's a Low Down Payment?
A low down payment is considered an amount below about 10% of the vehicle’s selling price. The recommended down payment amount is said to be around 20% of a car's negotiated selling price.
This has been held as the standard for many years, but it's getting tougher to meet as vehicle prices climb. The average price of financing a new car is over $40,000 – you're looking at around $8,000 for a down payment in this case.
Do I Need a Down Payment?
In the world of bad credit car loans, a minimum down payment requirement is typically 10% of a vehicle's selling price, or $1,000. If your credit score falls at 670 or below, you're likely to need at least this much down. Sometimes, a special finance lender accepts the lower of the two amounts.
If you choose to make a low down payment you could be shooting yourself in the foot for later, since a bigger down payment often has more benefits than drawbacks.
If you choose to make a low down payment you're saving money upfront, but you could be costing yourself down the road. Making a low down payment means financing more for your vehicle.
Disadvantages of a Low Down Payment
There are a few downsides to making a small down payment. These include:
- Higher loan amount – The less you put down, the more you have to borrow.
- More interest charges – The more you finance, the more there is for interest to accrue on.
- Less flexible loan terms – Without the power of a large down payment, you may not be able to negotiate your loan terms like you would if you had borrowed less.
- May impact loan approval – With a smaller down payment, you may not be able to get approved for the loan amount you're seeking, if at all, depending on your situation.
Getting an Auto Loan
If your credit score is suffering, making a down payment is typically a requirement of getting a car loan. It's sometimes possible to get a vehicle with a low down payment, but in most cases, it isn't wise. The more you can put down upfront, the less you have to borrow, the fewer interest charges you pay, and the quicker you can be done with your loan.
If you saved your down payment and are ready to find your next auto loan, but aren't sure where to start your car buying journey, we want to help. At The Car Connection, we're always ready to help borrowers find the dealership that can connect them to the lenders they need. We work with a large network of special finance dealers that are signed up with lenders that work with no credit, bad credit, and even bankruptcy.
Don't delay, get started toward your next auto loan by filling out our no-obligation secure car loan request form.