The Right Down Payment Amount

Financial experts from Edmunds to Consumer Reports traditionally recommend a 20% down payment amount because:

1. A significant down payment lowers your monthly payments considerably over putting 7%, 6%, or zero down.
2. A new vehicle generally depreciates by 20% in the first year.  By putting down 20% upfront, you effectively cover this depreciation, ensuring that you don’t become “upside down” on your auto loan.  Being “upside down” is another word for negative equity — both mean owing more on the car than it’s worth.

Don’t Forget Dealer Trade-ins

Now, 20% is $5,000 for a $25,000 car — that’s a good sized chunk of loot for most budgets.  But remember that a down payment doesn’t have to be paid all in cash. If you have a vehicle to trade in, the dealer will give you a trade-in allowance credited toward the down payment on your new vehicle.

If you’re not in a hurry, you can also sell your existing vehicle yourself via Autotrader, Craigslist, eBay or local classified listings.  Typically, you can net more money selling your old car as a private seller than you’re likely to get for a dealer trade-in.  That said, selling the car yourself takes more time, and you might need transportation during the interim between selling the old vehicle and getting the new one.  For trade-in and private market values for the vehicle you want to sell, the best resource is the Kelley Blue Book (www.kbb.com).

When you submit your application via our site, add together your cash + estimated trade-in allowance in the down payment section.

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