car on top of calculator

Do I need to make a down payment for a car loan?

Buying a car is a huge investment, and there aren’t many people who have the financial means to pull out that kind of money in one go. That’s where car loans come in, by making vehicles more affordable to buyers and allowing them to pay the amount over a longer period of time. Car loans are provided by car dealerships, banks and credit unions.

Do I have to make a downpayment?

You may find yourself in need of a car to get you from A to B but without the cash to offer up front. Luckily, a down payment isn’t always necessary to qualify for a car loan, although they certainly help.

What are the benefits of a down payment?

From the perspective of the lender, any money given up front is a positive sign. It places some money into their hands meaning that should the borrower find themselves at a loose end, unable to make payment, the lender will have managed to gather some of the loan before they even receive the first payment. Additionally, if you have a car loan for a new vehicle, this initial payment can offset the depreciation that occurs with new cars the minute they leave the lot.

A down payment represents the borrower’s financial capability, and shows they have an income, which in turn can lower the both the monthly payment cost and the overall cost of the vehicle.

What other options are available?

The reason you can gain a car loan without making a downpayment is because there are other factors involved in the process. A lender will consider your fixed income and your credit history. If you have a set amount of money coming in every month, plus a good credit history, most lenders will be happy to offer you a loan free of down payment in the knowledge that you will make payment.

The only downside to this is that you may experience a higher interest rate on your monthly payments as a result.

However, even if you have no credit history there are alternatives such as trading in an old vehicle. Should a dealer accept the purchase price of your used vehicle, this could be put towards your loan and subtracted from the purchase price of your new run around.


No matter what your financial situation is, there are steps you can take towards bagging the car of your dreams. The best thing to do is assess your options and speak with a broker to see what types of loan are available for you.