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What's a Good Down Payment on a Car?

Choosing the right down payment amount can be critical to getting the best terms on your car loan.

There are many benefits to putting a down payment on a car, particularly a large down payment.

When you make a large down payment the lender — including credit unions, banks, and dealership-affiliated lenders — will offer you a lower interest rate on your auto loan. A lower interest rate means you’ll pay less over the course of the loan.

When thinking about how much you should put down on a car, the most important thing to keep in mind is that a good down payment is one you can afford.

You should never empty your bank account to make a down payment on a new car purchase, unless you created the account for saving for a down payment and have other savings you can rely on.

Credit Union of Southern California (CU SoCal) is the fastest growing credit union in Southern California, offering up to 120% financing for new and used vehicles1, rates as low as 2.89% APR2, quick pre-approvals, no application or funding fees, a personal auto-buying concierge service, and more!

Call CU SoCal at 866.287.6225 to schedule a no-obligation loan consultation, or apply online today!

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What Is a Down Payment on a Car?

A down payment is the amount of money a car buyer pays up-front to reduce the amount of the loan needed to finance the balance of the purchase.

For example, if the car you want to purchase is $35,000 and you make a $10,000 down payment, you will need to apply for a $25,000 car loan. The smaller the loan amount, the less money you’ll pay on interest over the life of the loan.

Benefits of Making a Down Payment

There are many benefits to making a down payment, including the following:

Lower Interest Rate

Putting more money down on your purchase reduces how much you owe and decreases the risk associated with your loan. As a result, making a sizeable down payment on the purchase could result in a lower interest rate.

The interest rate and APR on a car loan are two different entities. The interest rate on a car loan does not include fees charged for the loan. The Annual Percentage Rate (APR) is the total cost the borrower pays on the loan each year, including fees.

Better Chance of Getting Approved

Marking a large down payment means you’ll have to finance less of the purchase price, which will result in a smaller loan amount. Lenders will see the smaller loan as less risk, and will be more likely to approve the loan

Lower Monthly Payments

Making a larger down payment means you’ll pay more cash up-front to reduce the loan amount you’ll need to get approved for. The more money you put down, the lower your monthly payments will be.

Protection from Depreciation

On average, a new vehicle depreciates by 30.5% in its first year, 7.7% in the second and 6.8% in the third year, according to Edmunds data.

This depreciation is an average among all brands, but as a general rule, luxury vehicles will depreciate faster, while vehicles with higher resale value (Toyota, for example) will be closer to 20%.

If you only put down a small amount of money, you'll have negative equity in the car, meaning you'll owe more on it than it's worth.

Shorter Loan Term

A loan “term” is the number of months during which you will have the loan. Most car loans are available in 12 month term increments, up to as 84 months (which is seven years).

While long-term loans are attractive because they require lower monthly payments, the longer the term, the more you will pay in interest over the life of the loan. Making a large down payment toward the purchase price can reduce the term of the loan and save you money.

You'll Pay Less Interest

Making a larger down payment lowers your interest in three ways: You’ll need to borrow less as a car loan, lenders consider large down payment borrowers to be lower risk and will offer you a lower interest rate on a loan, and a shorter term will be necessary to pay off the loan. Put this all together and it adds up to savings for you!

How Much Should You Put Down on a Car?

When it comes to the average down payment on a car or typical down payment on a car, the rule of thumb is that putting down as much as you can afford is generally a good idea. The typical down payment on a car ranges from 11% to 20% of the car's value.

The credit bureau Experian says a 20% down payment might help shield you from depreciation. Depreciation refers to the ever-shrinking value of your car. The value of a new car declines about 20% in just the first year. Each year after that, there's even more depreciation.

See how much of a down payment you can afford, using this Car Loan Payment Calculator.

How to Save for a Car Down Payment

Once you’ve decided how much should you put down on a car, it’s time to start saving. If you don’t need to make an emergency purchase, then you’re ready to start saving today.

First, create a timeline for when you want to make your purchase, decide on what make and model you want, create a budget, and decide whether you want to purchase a new or used car. For a complete list of tips, visit "How To Save Up Money For A Car."

As you’ll see, saving for an average down payment on a car requires a savings goal and a plan for reaching it. For more information on these topics, please read our article on “What Is Car Financing?

Use the CU SoCal Car Loan Payment Calculator now to determine how much car you can afford.

Why Savvy Consumers Choose CU SoCal

For over 60 years, the Credit Union of Southern California has been proudly serving Orange County, San Bernardino County and Riverside County. We are Southern California's fastest growing credit union.

Apply For A CU SoCal Auto Loan Today!

At CU SoCal, we lend on character, not just on credit scores. If you’ve been turned down for an auto loan because of a low credit score, we can help! We listen to your story and look beyond your credit score today to offer the right auto loan that will help you become financially stronger tomorrow.

Please give us a call today at 866.287.6225 for an expert, no-obligation consultation or apply for a CU SoCal auto loan today!


  1. APR=Annual Percentage Rate. Rate quoted as of 7/8/19 for up to 72 months and is subject to change. Rate includes a 0.50% reduction for payroll direct deposit (at least half of net payroll) into a CU SoCal Checking Account with automatic payment to your loan. Your rate may adjust if you discontinue direct deposit/payroll or payment transfer. The above discounts are one time, and only apply at time of origination. Estimated payment $1.49 per $100 borrowed. Rates are based on a variety of factors, including credit rating. Not all buyers will qualify.
  2. Amount financed may not exceed 120% retail Kelley Blue Book including tax, license, warranty, etc. Older used vehicles may be eligible up to wholesale Kelley Blue Book value with a one percent rate adjustment.
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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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