There are lots of factors to keep in mind when you’re trying to buy a car — not only pertaining to the actual model and vehicle you choose but also when it comes to paying for it. Getting all your ducks in a row before you get too far into the car-buying process will help you know what to expect before it happens and get the best deal possible.

One big question hopeful car buyers have is how much they need to make as a down payment. As with any question in the automotive realm, it depends on your circumstances.

Here are some considerations to help you decide how much your vehicle down payment should be. 

How Much Money Should You Put Down When Buying a Car?

There’s no hard-and-fast rule on what makes the ideal down payment these days, but there are some rules of thumb that can help guide you.

The most basic, common advice says that new cars typically require at least 20 percent of the purchase price down and used cars require about 10 percent down at a minimum. These have been touted as the percentages that will demonstrate to lenders you’re a good investment as a borrower — as you’re willing and able to invest a few thousand dollars up front and are therefore likelier to stick with the repayment plan — and keep monthly payments reasonable for you. Different lenders also have different requirements, so check directly with them to learn more.

If you don’t see yourself being able to save up 20 percent or more before you need to acquire your next vehicle, there is hope. Research from Edmunds actually shows the average down payment is around 11.7 percent, as vehicles have appreciated faster than income. This goes to show it’s not absolutely a dealbreaker if you’re unable to gather a large lump sum. However, it is generally beneficial to amass as much as you can upfront to increase your chances of loan approval and help keep your payments reasonable.

If you have questions about how down payments work and how to qualify for a loan, try searching keywords like “first-time car buyer programs near me” to find online hubs that will walk you through the various steps. This way you can walk into the dealership armed with knowledge, rather than depending on the salesperson to explain the process and handle the financing. 

Why Is a Down Payment Important When Buying a Car?

The next question on your mind is probably something like: Why is the down payment so important when buying a car, anyway?

Here are the advantages of making a robust down payment:

  • It helps you gain equity in your vehicle by offsetting the initial depreciation hit that all cars take when they drive off the dealership lot. This is why used cars typically require less money down — they already took that initial depreciation hit as a new car before you came into the picture.
  • You will avoid going “upside down” in your loan, a situation in which you owe more than the car’s value. This prevents you from needing to come up with funds to bridge the gap between what you owe and what it’s worth if it’s totaled or if you decide to sell it.
  • You can likely agree to a shorter loan term, which ultimately reduces the interest charges you’ll pay.
  • The car becomes fully yours faster, which means you can have more time driving it without having to make monthly payments.

These considerations should help you decide how much your car down payment should be, depending on the vehicle, your budget and the loan terms you seek.