Depending on your budget, a down payment on a used car can be a hindrance. What if you can’t afford it? Financing a used car with a low down payment is possible. At Hawthorne Auto Square, we offer the opportunity to take 5 months to build your down payment and other options to help you afford a used car. Therefore, the upfront cost does not prevent you from getting into the car you need and want.

How Does a Down Payment Work?

A down payment is an amount you pay towards the total cost of a used car. The more you put down, the less you’ll owe on the vehicle loan. Used car buyers are often advised to put at least 10% down (for new cars, it’s at least 20%). For a valuable used car, this can mean pulling thousands of dollars out of your bank account.

How to Finance a Used Car with a Low Down Payment

If you want to put less money down on a used car, here are some tips that can help:

  • Improve Your Credit: If you have outstanding debts, try to pay them down, or work on lowering your debt-to-income ratio. Less risk for the lender can help lower your down payment and qualify you for a loan that covers more of the vehicle’s cost. Having a high credit score also helps.
  • Buy a Lower-Priced Used Car: If reducing the down payment isn’t possible, shop for a used car that’s less expensive. Therefore, less cash is required upfront. This also helps narrow the range of cars you can afford that still meet your basic needs.
  • Pay as Much as You Can: Offer to put down an amount lower than the dealership recommends. Depending on your situation, they may accept your offer. You can pay extra on your car payments if able to later and still pay off your loan on time. 
  • Present the Dealer With the Required Information: Regardless of the financing options available, the dealer/lender is going to need certain information. Gathering the right documents beforehand will save time. For example, you’ll need your proof of income, proof of residence, and driver’s license or ID card.
  • Purchase Additional Insurance: Your down payment doesn’t directly affect your car insurance rate. The make and model of your car, age, and location determine insurance costs. If you make a low down payment, you can consider gap insurance or loan/lease payoff coverage. It can help pay off the remaining balance if your car is totaled or stolen and there’s a big gap between its value and what you owe.

What Are the Benefits of a Higher Down Payment?

Financing a used car with a low down payment is possible but can have downsides. Let’s look at the benefits of putting more money down on a car:

  • Lower Monthly Payments: A down payment helps you pay less each month. Generally, your monthly payment can be reduced by $15 to $18 for every $1,000 you put down.1 You can use this formula to decide what to pay upfront or if it makes a significant difference in your monthly payments.
  • Lower Interest Rate: The more substantial your down payment, the lower the purchase price and the less you need to borrow. This reduces the risk for the lender, so the interest rate is lower. Borrowing less also means you can pay off the loan faster. Therefore, you can pay less interest over the life of the loan.
  • Reduced Loan-to-Value Ratio: Lenders limit how much you can borrow compared to the value of the vehicle. This loan-to-value ratio is set individually by each lender. Their requirement can affect how much of a down payment you need.
  • Improved Chances of Approval: A larger down payment can be beneficial if you have a low credit score or no credit. Depending on their requirement, a lender can approve you for financing with a lower interest rate and other favorable terms.
  • Lower Odds of Being Upside Down: Making a low down payment can lead to owing more on a loan than the car is worth. If you sell the car in this situation, you would owe the difference, and if your car is totaled, the insurance company may not cover the full amount you owe.

How Much Is the Typical Used Car Down Payment?

At Hawthorne Auto Square, we can approve you for a car down payment as low as $150. However, the typical down payment ranges from $300 to $350.2

How Are Down Payments Determined?

If you’re looking to put less money down, we’ll look at your credit and financial situation to determine what you qualify for. Other factors include the loan amount and the length of the loan.

How Does My Credit Score Affect My Down Payment?

You typically have more flexibility if you have a high credit score. If you have a lower credit score, you may be required to pay more upfront. We work with all credit scores and have various used car down payment programs to help you.

Can I Make a Down Payment with a Credit Card?

Depending on the dealer, using a credit card might be an option. However, you may be charged a fee and, if you don’t pay the balance right away, owe more in interest than with your used car loan. Therefore, using a credit card can increase the total cost of your purchase.

Contact Hawthorne Auto Square

We offer several down payment programs at our Los Angeles used car dealership. These include taking 5 months to build your down payment. We approve applicants on a case-by-case basis. Whether you are a first-time car buyer, have bad or no credit, a fixed income, or even past repos or bankruptcies, we’ll work with you. Therefore, you can find a high-quality vehicle and be approved for a low APR car loan. For more information, visit our dealership or call (866) 707-7664.