Making a down payment of at least 10% of the purchase price of a new car (10% for a used one) is good practice. A larger down payment can also help you nab a better interest rate.

But how much a down payment should be for a car isn’t black and white. If you can’t afford 10% or 20%, the best down payment is the one you can afford.

Let’s break it down.

So, you’re thinking about buying a new car and you’re wondering if $5,000 is a good down payment. Well, it depends.

**Here are a few factors to consider:**

**The price of the car:**If you’re buying a $25,000 car, $5,000 is a good down payment. However, if you’re buying a $50,000 car, $5,000 is a smaller down payment.**Your credit score:**If you have a good credit score, you may be able to get a lower interest rate on your car loan, even if you make a smaller down payment. However, if you have a bad credit score, you may need to make a larger down payment to get a good interest rate.**Your budget:**How much can you afford to pay each month for a car payment? If you can afford to make a higher monthly payment, you can get away with making a smaller down payment. However, if you can only afford to make a lower monthly payment, you may need to make a larger down payment.

Here’s a general rule of thumb:

- For a new car, aim to make a down payment of at least 20%.
- For a used car, aim to make a down payment of at least 10%.

Of course, these are just general guidelines. The best way to figure out how much you should put down on a car is to talk to a lender and get pre-approved for a loan. This will give you a good idea of how much you can afford to borrow and how much your monthly payments will be

**Here are some additional tips for making a down payment on a car:**

**Save up as much money as you can.**The more money you can save up, the less you’ll have to borrow and the lower your monthly payments will be.**Consider getting a cosigner.**If you have a cosigner with good credit, you may be able to get a lower interest rate on your car loan.**Shop around for the best interest rate.**Don’t just accept the first interest rate that you’re offered. Shop around and compare rates from different lenders.

Because purchasing a car is a major decision, you should do your homework and ensure that the terms of your loan are acceptable to you. You can make sure you’re getting the greatest deal on your new car by paying attention to these pointers.

**Here are some additional resources that you may find helpful:**

**NerdWallet’s Guide to Buying a Car****LendingTree’s Auto Loan Calculator****The Consumer Financial Protection Bureau’s website**

**P.S.** If you’re still not sure how much you should put down on a car, feel free to ask me a question in the comments below. I’m happy to help!

**P.P.S.** I’m also a big fan of using emojis in my writing. I think they make my writing more fun and engaging. What do you think?

## Why a down payment for a car is important

Ads offering “zero money down” may appear, and although it may be alluring, it’s not always a wise choice. Putting money down on a car, even less than 20%, will usually work in your favor.

A down payment removes some of the lender’s risk and transfers it to you. After all, you’ll lose your down payment if your car gets repossessed.

The less risk a lender faces, the better its loans tend to be. Putting money down on a car could lead to….

Simpler loan approvals: Lenders might be more accommodating to you if you have poor credit because you have a stake in the outcome. In other words, a down payment could get a lender to approve you when you’d otherwise be denied.

Lower interest rates: Your annual percentage rate (APR) depends on several factors, including how much you borrow. A smaller auto loan could “reward” you with a better rate since the lender will lose less money in the event of default.

Lower monthly payments: The more you put down on your car, the less you’ll need to finance. The less you need to finance, the lower your monthly payment could be (depending on your term length).

Reduced likelihood of being upside down: An upside-down car loan is one that results from owing more on your vehicle than its market value. One drawback of upside-down auto loans is that you might have to pay off the entire amount owed before you can sell your vehicle.

Thanks to car depreciation, your ride could lose 20% of its value during its first year. This, coupled with no down payment, could mean you’re upside down before you get your car home.

## How much should you put down on a car?

Buying a car is a balancing act. Making a large down payment can work in your favor. However, you also don’t want it to grow to the point where it becomes unmanageable or depletes your emergency savings.

This is where the 20/4/10 rule might help.

The 2020/4/10 rule states that you should choose an auto loan with a term of four years or less and that you should put down at least 2020%. Also, your total transportation costs (car payment, insurance, gas, etc. ) shouldn’t eat more than 10% of your monthly income.

### How Dealers turn your Cash down into profit! Car Buying Tips

### FAQ

**What is a realistic down payment for a car?**

**Is $1000 enough for a down payment on a car?**

**Is $4,000 a good down payment for a car?**

**How much should I put down on a 20k car?**

**Should you buy a car with a 20% down payment?**

Many people do buy cars with lower down payments. Some simply don’t have enough money saved to put down the recommended amount, especially as car prices have skyrocketed. In 2021, the average price of a new car was approaching $42,000, meaning a 20% down payment would be $8,400.

**How much of a down payment should you make on a car?**

The general recommendation is to make a down payment between **10 to 20 percent** of the vehicle price . However, if you can afford a larger down payment, you can save even more money on interest

**Should you buy a car with a hefty down payment?**

Equity: A hefty down payment can help ensure the asset is worth more than the amount you owe. This can also protect your financial stability in case you need to sell or trade in the vehicle before the loan matures. Can I Buy a Car Without a Down Payment? Buying a car without a down payment is possible, but it’s not recommended.

**Can you put a 10% down payment on a car?**

For example, if the dealer offers $3,000 for your current vehicle, you could use all of that and cover a 10% down payment. Or if you had already saved an additional $3,000 and wanted to lower your monthly payment, you could combine the amounts and put 20% or $6,000 down. Does My Credit Score Impact Down Payments?