How much is the average down payment on a vehicle? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content, by enabling users to conduct studies and compare data for free and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website are provided by companies that compensate us. This compensation could affect how and when products are featured on the site, such as the order in which they may appear within the listing categories, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. However, this compensation will have no impact on the information we provide, or the reviews you read on this site. We do not contain the vast array of companies or financial deals that could be open to you. EXTREME-PHOTOGRAPHER/Getty Images
3 min read published October 20 in 2022.
Written by Allison Martin Written by Allison Martin’s work started over 10 years ago as a digital media strategist. She’s published in numerous prestigious financial publications, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Edited by Rhys Subitch Editor: Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers to manage their finances through providing precise, well-studied, and reliable facts that break down complicated subjects into digestible pieces. The Bankrate promise
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We receive compensation for placement of sponsored products and services or through you clicking certain hyperlinks on our site. This compensation could impact how, where and in what order items appear in listing categories in the event that they are not permitted by law for our credit, mortgage, and other products for home loans. Other factors, such as our own website rules and whether or not a product is offered in the area you reside in or is within your own personal credit score may also influence the way and place products are listed on this website. We strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit products or services. Prices for used and new cars have shot up, forcing customers to pay more expensive monthly payments. A lot of people are digging to their bank accounts to make . But exactly how much money do you have to invest to secure a ? A lot of financial experts recommend 10 to 20 percent. However, it’s vital that you assess your financial situation in order to determine the number that fits your budget. The average car loan down payment In the first quarter of 2022 the average down payment on the purchase of a brand new car was $ , according to Edmunds. This is a significant rise of 27 percent from the same time last year which is also the largest it’s ever been. The average down payment for used vehicles was lower at $3,574 over the same period. Still, this figure is 7 percent more than it was a year ago. With the current conditions in the market, elevated down payments aren’t unexpected. Used and new vehicle prices also reached record levels in the beginning quarter of 2022. The average auto loan amounts was $39,340 and $308,830 for new and used cars, respectively, compared between $35,040 and $23,958 during the 4th quarter in 2021. How much should a vehicle’s down amount be? Financial experts suggest that you make a down payment of at minimum 20 percent when financing a . This is steep for many, especially when coupled with the recent rise in new and used automobile costs. For instance, a 20 percent down payment on the equivalent of a $35,000 car is $7,700. There are a few advantages for putting this sum down. You can increase the odds of getting approved and qualify for higher interest rates. In addition, your monthly payment will be less, as well as you’ll be paying less interest over the course that of your loan. When you’ve got hefty amount of money saved, putting that amount down might not be an issue. In other cases, it’s not worth empting your savings account in order to make an investment. It is also possible to achieve the suggested 20% down payment. If not, you should aim for 10 percent as this amount is still acceptable to most lenders. and only put down what you are able to afford. What can I do to purchase a car without a down amount? Some dealers will allow you for financing with little or none of a downpayment, contingent on your credit history- but these loans typically come with a higher interest. If you’re lucky enough to be able to get a without putting money down, it may not be a bad idea. You could invest the funds to build up your savings instead of using it to pay for a down payment. These loans generally require good credit. However, there’s a major risk to keep in mind. If your vehicle is damaged and you don’t have , you could be required to pay any difference in what the insurance company is willing to pay your lender and what you have to pay. How do you determine a downpayment Bankrate’s can help you estimate the potential savings you could make by placing money down or trading in the vehicle you have. You’ll need the purchase cost, loan term, interest rate, the tax rate (federal and local) and the minimum and maximum amount of your down payment to start. To illustrate, assume you’ve been approved for a 4-year auto loan with a rate of 6 percent. You are able to deposit between $2500 (or 10 percent) or the equivalent of $4,000 (or 16 percent) down. Here’s how to make use of the calculator: Step 1: Enter $4,000 and $2,500 in the maximum and minimum down payment boxes. Step 2: Enter the purchase price of $25,000, the loan duration of 48 months and an interest rate of 6 percent into the boxes marked. Step 3: Enter the amount you believe you could earn from the down payment, if you were to invest it instead. For this example, consider using 3 percent. Fourth step: enter the state and federal tax rate. Choose 7 percent for this example. Based on these inputs the monthly installment with a $2,500 down payment will be $528.41 as compared to $493.41 with a $4,000 down payment. By putting more down it would save you $109.86 per month, or $3,773.28 over the life that of the loan. The reason why a down payment is essential Besides significant cost savings and lower monthly installments, here are some additional reasons why : Better loan terms: A higher down payment can qualify you for , typically as an interest rate that is lower. More equity: You’ll start with equity in your vehicle when you make a down payment, which means you’ll owe less than what the car is worth. This protects you from paying the extra amount if you choose to sell your vehicle or trade it in shortly after you’ve taken off the loan. Next steps Even though the typical vehicle loan down payment is increasing but you’re not completely out of luck if you do not have a lot of cash. Aim for a down payment of at least 10 percent, or work with a lender willing to settle for lower amounts if you’re not able to pay the money. Make sure you bring something to the table. Even a small down payment may help you secure an auto loan that is fair and minimize the chances of owing more than the car is worth early in the loan term. Utilize our down payment calculator before car shopping to determine the right price points to match your desired down payment amount. Learn more
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Allison Martin’s work began more than 10 years ago as an online content strategist and she’s since been published in various top financial media, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances with concise, well-researched and well-informed information that breaks down complex topics into manageable bites.
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