What can I use as a down payment on an auto loan?



Cash is king when it comes to putting money on a car loan, but you may have a few other options that you can use.

Auto loan installment options

Typically, you can’t use money or income that you don’t already need to put down a down payment on a car loan. This means that obtaining a loan specifically to pay a down payment is excluded. Lenders almost always require a down payment that comes from your own money.

This may include:

  • Money saved on your own income
  • Vehicle trade-in value
  • Refund of the tax return
  • Stimulation controls
  • Equity benefits
  • Rental income
  • Money offered to you (no refund obligation)
  • Unearned income such as alimony or social security
  • Money earned on unemployment checks
  • Profit from the sale of assets

Here are some things auto lenders don’t usually accept as a down payment:

In rare cases, a lender may accept a down payment from a credit card. However, this is rare and generally not recommended. You may have to repay this amount, and credit card interest rates can be high. If you can’t quickly pay off what you owe on the credit card after using it for a down payment, it could mean paying a lot more interest charges over time. And, to top it off, most lenders just don’t accept credit cards as a down payment, so it’s advisable not to anticipate this to be an option.

Why should you have a down payment

Do you want to have a better chance of getting approved for an auto loan? So come prepared with a deposit!

This is especially true for borrowers whose credit is not perfect. A lower credit score can mean a high risk of refusal. But down payments can increase the chances of approval and help you get the vehicle financing you need.

When you finance a vehicle, the lender may require “the skin of the game” – a down payment. Cash shows that you are willing to invest in your success and put some of your equity on the line when you finance a car. The biggest concern of a lender is your ability and willingness to repay the loan. By giving the money, you are securing the loan with some of your money now, proving that you are financially stable enough to save money for the vehicle.

In addition to proving that you are capable of paying off a loan, lenders also love down payments because they lower the chances of the auto loan going into default (when you stop paying). Default and subsequent repossession are costly for a lender, and a problem for you too. Down payments decrease the amount you need to finance, resulting in lower monthly payments, making it easier for you to pay off the loan on time.

How much should I put on a vehicle?

The old car loan advance notice was 10% on a used car and 20% on a new one. But with the rise in vehicle prices over the past decade, this advice has fallen somewhat into disuse.

Borrowers in our dealer network tend to have an average down payment of 13%. It is generally recommended that a borrower with bad credit repress as much as possible. A larger down payment can give you some negotiating power in terms of interest rates, broaden your vehicle options, and increase your chances of approval.

How much you have to put in is unique to you. But when you have bad credit, you can expect a down payment requirement of at least $ 1,000 or 10% of the vehicle’s selling price if you are working with a subprime lender. Subprime lenders specialize in assisting borrowers with unique credit situations and they are available at special financing concessions.

Let’s do some car shopping!

TO Auto Express Credit, we know that preparing a car loan is only part of the journey of buying a car. For many borrowers with bad credit, finding a lender who can work with your unique credit situation can be a big deal. We want to guide you to a dealership that is registered with subprime lenders so you can focus on preparing for your next car loan and skip the dealership search.

Get started immediately by filling out our free auto loan application form. We have assembled a nationwide network of special finance dealers and will be looking for one in your area with no obligation.


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