You may know that cash is king, but there are many things you can use as a down payment for your next car.
Making a Down Payment on a Car
Down payments are often required on auto loans, especially with less than perfect credit. If you apply for a car loan from a subprime lender signed up with a special finance dealership, you can expect to need at least $1,000 down or 10% of the vehicle’s selling price.
However, you don’t have to use just cash to meet a lender’s requirement or lower the cost of financing your next car.
Here are some things you can use to make a down payment on a vehicle:
- Your own income
- Unearned income, such as Social Security
- Equity from a trade-in
- Unemployment checks
- Stimulus checks
- Tax refunds
- Stock earnings
- Profits from the sales of your assets
- Gifted money
- Rental property money
If it’s your money, and you're not borrowing it, then it can almost always be accepted as a down payment on a car.
What You Can’t Use as a Down Payment
There are a few things that lender’s and dealerships aren’t likely to accept as a down payment:
- A personal loan
- Credit card
- Money from a payday advance loan
Any money that’s been borrowed from someone else isn’t likely to be accepted. Lenders and dealerships require that your down payment on a vehicle is from your own funds. If you’re borrowing money to put cash down on a car, it could be seen as risky, and could hurt your auto loan approval odds. Many lenders require down payments to see if you’re willing to put skin in the game and invest in your own success.
Benefits of a Down Payment
Even if a lender or dealer isn’t requiring you to have a down payment, it’s still a good idea to put some money down. It’s often recommended to put at least 10% down on a used car, and around 20% down on a brand new one. If you’re looking to buy a $10,000 vehicle, then $1,000 is likely to be considered a good down payment amount by a lender.
Down payments lower the amount you need to pay in interest charges over the course of the loan, lower your monthly car payments, and increase your approval chances if your credit is worse for wear.
Get Moving on a Car Loan!
Saving up for a down payment on a vehicle is a good place to start your car buying journey. However, if you don’t know where to find auto lenders willing to assist you with poor credit, then getting behind the wheel could be a hassle.
Here at The Car Connection, we want to make your search for a dealership a little easier using our nationwide network. Over the last 20 years, we’ve created a network of special finance dealerships all over the United States, and once you complete our free auto loan request form, we’ll look for one in your local area.