What kind of down payment do I need to finance a car?

A car commercial comes across the TV screen. In big, bold numbers, the ‘low monthly payment’ grabs your attention. Can you really buy the car for so little? Of course, what you DON’T see is the fine print at the bottom of the screen. It tells you the payment doesn’t include taxes or dealer fees. It also says that X amount is due for down payment. But do you really need a certain amount for a down payment? How do you know if it’s a requirement?

How Much Down Payment is Required for a Car Loan?

The Purpose of a Down Payment

In previous years, a down payment was mandatory to purchase a car. It stems from high interest rates and a higher likelihood of defaulting on your loan payments. A down payment brought the total amount financed lower than the car’s value, making the purchase more secure for the dealership. Today, a down payment does the same thing in some situations. In others, the purpose is strictly to make the payment more attractive or affordable.

What MUST I Pay for a Down Payment?

It depends on your credit situation, if you have a trade-in, and how much the loan is for. It also depends on the lender.
  • If you have great credit and the loan is straightforward, it’s unlikely that you MUST put money down to finance a car.
  • If you have subprime personal credit, you may need to put up to 20 percent of the car’s value as your down payment. However, if you’re trading in a car, its value can be applied as your down payment also.
  • If your loan payments will be more than your debt service coverage ratio(DSCR) allows, your loan may be capped at a maximum well below the vehicle’s value. Applying the difference as a down payment can mean you are still able to finance the car.
As a general rule, a car buyer with credit in good standing, along with reliable income that supports the payment amount, is able to purchase a car without a down payment.   If you want to know if you’ll be approved for a car loan without a down payment, or to find out how much down payment is required, CarUP KC can help. One quick credit application is all it takes to find out if you’re approved for the car you’ve always wanted. Choose a vehicle we have in our inventory or set us to the task of finding the perfect car for your needs. In Kansas City and the surrounding areas of Missouri, we’re your premier used car dealership!  

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