If you’ve heard of the phrase “zero money down” on car deals, you may be wondering what that means, and how you can get a vehicle with no money down. Whether or not you qualify for, or can get approved for, a no money down deal usually depends on your credit score.
What is Zero Down Payment on a Car?
A zero down car payment means you don’t need a down payment when you finance a vehicle. If you have good to excellent credit, you can typically choose not to make a down payment. But, remember, a down payment is there to help, not hurt you. Some benefits of making a down payment are:
- Lowers the loan to value ratio
- Reduces your monthly payment
- Can make it possible to shorten the loan term and pay off the car faster
- Reduces the total interest charges you pay
- Reduces the time you’re upside down in the loan
If you’re unsure about making a down payment, note that you don’t have to necessarily make a cash down payment. If you have a trade-in that has equity, you can apply it toward a down payment to make the overall cost of financing lower.
Can You Buy a Car with no Money Down?
You can still buy a car without making a down payment, but only if you have good credit. If you’re car shopping and have bad credit, it’s usually required that you have a down payment. Subprime lenders work with credit-challenged car buyers, but in order to approve financing for someone with bad credit, they typically ask for a down payment. A down payment lets the lender know that you’re serious about successfully completing the loan.
Luckily for bad credit car buyers, the down payment requirement isn’t too hefty. Typically, lenders ask for a minimum of $1,000 or 10 percent of the vehicle’s selling price, whichever is less. You can either pay for it in cash, with trade-in equity, or a combination of both.
If you choose to finance through a buy here pay here lot, know that a down payment is usually required with these dealers, too. Depending on the car you finance, the down payment could be bigger than what a subprime lender requires. Buy here pay here dealers generally ask for a down payment to cover the cost of the vehicle they’re selling.
Looking for a Special Finance Dealer to Work With?
It may sound ideal to put no money down on a vehicle, but when you have bad credit, you typically can’t avoid making a down payment. If your credit is less than perfect, it’s best if you save and budget for a down payment before heading to a dealership.
If you ran the numbers and saved up for a down payment, but aren’t sure where to look to find financing, let The Car Connection help. We work with a nationwide network of dealers that specialize in helping credit-challenged car buyers get the financing they need. Getting started is easy, just fill out our auto loan request form, and we’ll get right to work finding a local dealership for you.