Here’s everything you need to know about whether you should put a down payment on your next automotive purchase. 

Down Payments Are Good, But Do You Need One? 

Exchange money and car keys
Exchange money and car keys

At we do what we can to educate you to get the best deal possible. We’ve told you how to use your tax return to buy a car, how to become an expert car buyer, and even where the best certified pre-owned programs are. Today, we’ll add to that library with a deep dive into down payments work, why you would put one down, why you might not, and what info you need to decide.

Let’s set the groundwork for our discussion by defining the down payment. It’s the lump of cold hard cash (or electronic transfer) that goes from your possession and into the coffers of the lending agency, dealer, or private party that you buy a car from. It’s a big deal literally and figuratively, and it lays the groundwork for a more secure financial journey that ends with having the title to your car of choice.

The Benefits of Buying A Car with A Down Payment 

Filling out form
Filling out form

Does one absolutely have to make a down payment to buy a car? The short answer is no, not always but it can be tricky and rare. For example, one might need to find a specific lender that offers 0-down financing. Often, such offers are only available to those with sterling credit scores though and even then, it presents additional risk.

While skipping out on losing a chunk of change up front seems alluring it’s important to consider the long-term implications of such a move. Buying a car without a down payment means driving off the lot with a larger financial burden strapped to your bumper. That initial injection of equity in the vehicle itself makes you more susceptible to negative equity or, in other words, ending up owing more for your car than it’s worth.

In addition, interest rates are sky high compared to a few years ago, which means that you’ll be financing more money, resulting in a higher total price and in higher monthly payments over a longer term.

Those aspects of buying a car with no down payment make it a no-go zone for most. If you’re still determined to go through with it, here’s how.

Buying A Car Without A Down Payment 

Credit score
Credit score

The first step is finding a lender, or dealer willing to sell the car in question without a down payment. As we’ve mentioned in other buying guides, be sure to look in a wide area and be willing to adapt your search field to increase the chances that you’ll find the financing you want. A few things can make that process easier.

First, keeping a neat, tidy, and preferably very high credit score provides more access to more lenders and lower interest rates. Those without a high credit score should work to improve it and consider getting a co-signer with a high score themselves. In addition, there are a few notes worth considering.

While a down payment might not be possible, it’s not too hard to supplement one in a few instances. Those who have a used car to trade in can leverage it as a down payment. Depending on the vehicle in question it could represent a significant chunk of the total cost of your new vehicle.

Tax refund
Tax refund

It’s also tax time and a big refund can be the perfect unexpected down payment. There are at least one or two other options to consider though. Many dealers and automakers offer big discounts or incentives from time to time. For example, Jeep just dropped the price of the Gladiator by thousands which is almost like having a fat down payment.

Finally, there are some cars, electric vehicles to be specific, that offer big tax incentives. When state and federal incentives are combined it could save a buyer $10,000 or more.

In Summary 

Buying a car
Buying a car

Let’s sum up what we’ve learned. A down payment is an important part of a car purchase but it isn’t always necessary. Good credit, the right lender, and the right deal might not require one. Still, buying a car without a down payment can be a financial pitfall worthy of avoidance at nearly all costs. It typically requires accepting a higher interest rate, higher monthly payments, a higher overall cost, and a longer term.

Those committed to buying a car without a down payment should keep a high credit score, be willing to search far and wide for the best deal, and leverage a trade in, incentives, and tax credits to reduce their financial burden.

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Stephen Rivers

Stephen Rivers is a car enthusiast who loves all things built with passion, extending to nearly all car cultures. After obtaining an occupational studies degree in sports medicine, Stephen turned his attention to sports cars. He was employed as an auto shop manager, spent time in auto sales, and worked as a software developer for a racing company, but Stephen began writing about cars over 10 years ago. When he's not in front of a computer screen, he's racing his own Bugeye Subaru WRX in as many autocross and rallycross competitions as he can.

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