What Kind Of Down Payment Do I Need When Financing A Car?

Autoplex Alberta
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What Kind Of Down Payment Do I Need When Financing A Car?
Autoplex Alberta

What Kind Of Down Payment Do I Need When Financing A Car?

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Purchasing a vehicle (new or used) from a dealer can present many benefits. A primary benefit includes that most dealers have the ability to offer financing payment options (auto loans). Financing a vehicle requires less cash upfront and lets you get driving the same day. Even if you don't have the full amount to purchase a vehicle, the option will be presented to give a down payment. Is a down payment required? How much should you really put down? What are the benefits and drawbacks of a down payment? We will attempt to answer all these questions.

When purchasing a vehicle a down payment is the act of putting a certain amount of your own money towards the purchase price and then financing the remaining amount. Common misconceptions to financing a vehicle is that a down payment is always required. In reality, a down payment is not always required but is always greatly encouraged by dealers to increase the customers chances of approval and to get the best interest rate possible on an auto loan. It is possible to finance a vehicle with zero down payment, and while there is no required down payment amount, a few thousand is usually recommended (depending on the vehicle price).

Why are down payments needed? 

As previously mentioned, it is possible to receive an auto loan with zero down. However, if you do not have the best credit, or have low/patchy income a down payment will greatly benefit your auto loan application; It may even be requested by lenders (the banks). A down payment has the ability to show both the dealership and lenders that you are committed to and have vested interest in the vehicle, thus decreasing the risk and helping your application get approved. In addition to helping you get approved, a down payment will also save you money. By giving a down payment on a vehicle you are decreasing the total loan principal amount, and therefore you will pay less in interest over the term of your auto loan.

What is the recommended down payment amount? 

Some argue that 20% is the recommended amount as it is usually still attainable for most buyers, and creates a positive relationship with lenders. By putting a 20% down payment on a vehicle this ensures that you will not pay more than the vehicle's value in interest over the term of the auto loan. The goal of financing a vehicle is to provide an affordable payment structure for the car buyer, therefore, if 20% down is too much for you, give less. Never put more down than you can afford or simply just purchase a cheaper vehicle. Your Autoplex Alberta representative will work closely with you to make sure your down payment is affordable and beneficial to you.

What are the benefits of putting a down payment? 

Down payments on an auto loan will increase your trustworthiness with the banks resulting in a higher likelihood of approval, decreased application approval time, and decreased interest rate. If you have had financial trouble in the past, bad credit, or low income a down payment will greatly help you compete for lower interest rates. A down payment will increase your financial and vehicle options as it will allow you to use your total loan approval amount on top of the additional down payment amount when selecting a vehicle.

What are the drawbacks of putting a down payment? 

The only downside to a down payment is that you have paid some money today on a vehicle. If you default on your auto loan (fail to make payments), it is possible for this down payment to be lost. 

Can you put down a zero down payment? 

Yes! Autoplex Alberta works with customers in all kinds of financial situations and will work to determine what financial plan works best to ensure they get approved. While zero down on a vehicle is possible it is ALWAYS recommended that if you can afford a down payment, you do. Keep in mind that zero down payment isn’t encouraged as this can slow down the application process, increase the interest rate, and/or cost you more in the long-term. If you are looking to finance a vehicle with zero down payment please speak with an Autoplex Alberta financial advisor to see how this can be made possible for you! 


Autoplex Alberta offers various financing options that best fits your needs. Call today to inquire about your options to determine what down payment options are available for you.

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