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What is the typical down payment on a vehicle? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct studies and compare data for free to help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies who pay us. This compensation can affect the way and when products are featured on the site, such as for instance, the order in which they may appear in the listing categories and other categories, unless prohibited by law for our mortgage home equity, mortgage and other home lending products. This compensation, however, does affect the content we publish or the reviews that you read on this site. We do not include the universe of companies or financial deals that could be accessible to you. EXTREME-PHOTOGRAPHER/Getty Images

3 min read published October 20, 2022

Written by Allison Martin Written by Allison Martin’s work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch Editor: Auto loans Editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-studied, and reliable information that breaks down otherwise complex topics into manageable bites. The Bankrate promises

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This compensation could influence the manner, place and in what order items appear in listing categories and categories, unless it is prohibited by law. We also offer credit, mortgage and other home loan products. Other factors, such as our own proprietary website rules and whether or not a product is available within your area or at your personal credit score may also influence how and where products appear on this website. We strive to provide an array of offers, Bankrate does not include details about each credit or financial product or service. Prices for used and new cars have shot up, forcing customers to settle for higher monthly payments. Many are also digging in their accounts of savings to earn . But how much should you save to fund an ? Some financial experts suggest 10-20. However, it’s vital to evaluate your financial situation in order to find an amount that is within your budget. Average car loan cost in the beginning of 2022 the average down payment on a new vehicle was , according to Edmunds. This is a steep increase of 27 percent from one year ago, and is the highest level it has ever been. The average down payment for used cars was lower at $3,574 in the same time. Yet, it’s 7 percent higher than what it was last year. Given current market conditions, elevated down payments aren’t unexpected. Prices for used and new vehicles also hit record highs in the beginning quarter of 2022. The average car loan amounts were $39,340 and $30,830 for used and new vehicles and trucks, respectively. This compares to $35,040 and $23,958 in the 4th quarter in 2021. How much should a car down payment be? Financial experts recommend that you make a down payment of at least 20 percent when financing a . This amount is a bit steep for many, especially in light of the recent rise in new and used vehicle prices. For instance 20 percent down payment on the equivalent of a $35,000 car is $7,700. However, there are advantages of putting such an amount down. You can increase your approval odds and qualify for higher interest rates. Additionally, your monthly payments will be lower, and you’ll pay less in interest over the life for the loan. When you’ve got large amount of money saved, putting that amount down might not be an issue. Otherwise, it’s not worth emptying your savings account in order to make a down payment. You could also get closer to the suggested 20 percent down payment. If not, try to get 10 percent since this is acceptable to most lenders. and only put down what you can manage to afford. What can I do to purchase a car with no down payment? Some dealers will allow you for financing with little or none of a downpayment, depending on your credit profile -however, these loans typically come with a higher cost of. If you’re fortunate enough to be eligible for an unsecured loan, without the need to make a deposit this might not be a bad idea. You could invest the funds to grow your money instead of applying it to an initial down amount. These loans typically require excellent credit. Still, there’s a significant chance to consider. If your car is totaled and you don’t have the funds, you could be required to pay for that gap between the amount your insurance company will pay your lender as well as what you are owed. How do you determine a down payment Bankrate’s can help you estimate potential cost savings by putting cash down or trading the vehicle you have. It’s necessary to know the purchase price, loan term, interest rate, tax rates (federal and state) and the minimum and maximum amount of your down payment to start. For example, suppose you’re approved for a 4 year $25,000 auto loan at 6 percent and can afford to deposit at least $2500 (or 10-percent) and the equivalent of $4,000 (or sixteen percent) down. This is how you can make use of the calculator: Step 1: Enter $4,000 and $2,500 in the maximum and minimum down payment boxes. Step 2: Input the purchase price of $25,000 and the loan period of 48 months, and the 6-percent interest in the boxes marked. Step 3: Enter the amount you think you would earn from the down payment, if you were to invest it instead. In this instance, you’ll choose 3 percent. Fourth step: enter the state and federal tax rates. Choose 7 percent for this scenario. Based on these numbers for a monthly payment, the amount for a down payment of $2,500 would be $528.41, compared to $493.41 for a $4,000 down payment. By putting more down, you’d save $109.86 per month or $3,773.28 over the course of the loan. Why a down payment is essential Besides significant cost savings and lower monthly payments there are other reasons why better loan terms: A higher down payment could get you a loan , typically in the form of lower interest rates. More equity: You’ll start by having equity on your vehicle when you pay a down payment that means you’ll be liable for less than what the car is worth. This will prevent you from being and paying the extra amount if you choose to sell your vehicle or trade it in shortly after you’ve taken off the loan. The next steps Even though the average car loan amount is increasing, you’re not entirely out of luck if you do not have a lot of cash. Try to make a down payment of at least 10 percent, or work with a lender willing to accept lower amounts if you’re not able to pay this amount. Make sure you bring an item to be discussed. Even a modest down payment can help you secure an auto loan with fair terms and lessen the risk of having to repay more than your car is worth at the beginning of the loan term. Utilize our down payment calculator prior to shopping for a car to figure out the right price points to match your desired down payment amount. Learn more

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Written by Allison Martin’s work began over 10 years ago as an online content strategist and since then she’s been published in various top financial media, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are enthusiastic about helping readers gain confidence to manage their finances with concise, well-researched and well-informed information that breaks down otherwise complicated topics into digestible pieces.

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