Auto Down Payment Calculator
How much of a down payment should you make on a car?
A down payment between 10 to 20 percent of the vehicle price is the general recommendation. But if you can afford a larger down payment, you can save even more money on interest payments over the life of the loan. By dropping the amount financed, you save some even before you start negotiating the car price.
For drivers with poor credit, a down payment can prove to be instrumental in gaining approval and receiving competitive rates. It is an excellent way to show potential lenders your commitment to the purchase and paying the loan off. If you still can't get a great rate when you first buy with a down payment, you may be able to refinance later for a better rate.
What to consider when deciding on a down payment
A down payment is the money that you pay upfront towards a vehicle purchase. It can be any combination of cash and a trade-in. The more money you pay, the better off you will be. Consider the differences between a new and used vehicle when determining how much money to put down.
Down payment on a new car
New vehicles depreciate at a much faster rate than if you were to purchase used. A high down payment of 20 percent or more can help protect you from that loss of value by making sure you have more equity in the car than what you owe. However, just because you can pay more cash upfront doesn't mean you should sign off on a vehicle that you cannot truly afford. Make sure your monthly payments, insurance and fuel costs are within your monthly budget.
Down payment on a used car
A used car, on the other hand, requires a less steep down payment. Because the value of a used vehicle has already undergone most of its depreciation, your down payment should be a minimum of 10 percent.
Down payment on a leased car
A large down payment can be helpful when buying a new car, but this approach is typically a bad idea when leasing a vehicle. If something happens to your leased car, your insurance will reimburse the leasing company rather than you, and you won’t get a refund for your down payment. What’s more, one advantage of leases is lower up-front costs. Providing a large down payment defeats this benefit.