Saving up for a down payment is one of the biggest hurdles of buying a car. It may not seem like it, but putting money down can have perks, such as borrowing less from a lender. But for some people, putting down less may be more practical. How low can you go? Here at Hawthorne Auto, let’s look at whether it’s possible to buy a car for $500 down.
It Depends on Your Credit
When you have a high FICO score, you may qualify for low or no down payments when purchasing a vehicle. Generally, you’ll need to have a credit score of 670 or above. Nonetheless, it’s still at the lender’s discretion to approve a borrower for such an arrangement.
If the lender does approve, you can get financed with $500 down. This will avoid making a 20% down payment as was often required in the past. You’ll save up front, but is a low down payment always a good idea?
Is Buying a Car for $500 Down Enough?
There are more options than ever to purchase a car with a small down payment. But that doesn’t always mean you should. In addition to reducing the amount of money you must borrow, a larger down payment can have the following benefits:
- The lender perceives you as more committed to completing the loan.
- Your monthly car payments will be lower.
- The terms of the loan may be shorter.
- Less paid in interest charges over time.
- Fewer odds of having negative equity, or owing more than the car is worth (a car’s value drops annually).
If you purchase a car with no down payment, you’ll have to borrow more money. Interest rates and monthly payments will be higher, the loan repayment term may be longer, and the vehicle may go underwater faster.
Can I Get a Car for $500 Down with Bad Credit?
Consumers with a low credit score can be approved for a low down payment. By getting pre-approved, you can see how much you qualify to borrow. A used car may be your best option because the interest rate is often lower when financing one. You won’t need as much to finance it as well, while your monthly payment will likely be lower. Therefore, this arrangement can work if you are on a budget.
Considerations When Making a Low/No Down Payment
In some cases, a $500 down payment is risky. You may want to consider purchasing gap insurance, which would avoid paying amounts above what the car is worth if it’s totaled or stolen. You can also designate a cosigner on the loan, which reduces the risk to the lender. This might even lower the interest rate. Also, you can look for a cheaper car that has the features you need rather than investing in a higher-level trim.
How Does a Down Payment Work?
The most common way to make a down payment is in cash, often as a check or money order. Some dealerships accept credit card payments. Trading in your existing vehicle is another way to get a car for $500 down or less.
Apply for In-House Financing with Hawthorne Auto Square
At our Los Angeles buy here pay here dealership, we’ve made it easier to choose from hundreds of low-mileage, pre-owned vehicles. You can take up to 5 months to build your down payment. In addition to stress-free financing with low down payment options (and no credit check loans), you can find a car that fits your budget. Continue browsing to learn more about Hawthorne Auto’s in-house financing programs and call 866-707-7664 to speak to a representative today.