Published August 10, 2017 | Updated April 9, 2021
The high sticker cost of a new car can mean a hefty down payment (conventional wisdom says 10% or more), which can be tough to afford. Fortunately, you can get into a new vehicle without a big down payment — or any down payment at all.
How a Down Payment Affects Your Car Loan
Buying a car with no down payment means your total loan amount is higher than it would have been with a down payment. Here are the effects of that:
- You'll either be paying more each month or you'll need a longer loan term to keep costs down.
- You'll need good credit to get the best rates (and sometimes to qualify for no down payment).
- Beware of dealership offers of "zero down, zero percent APR," which few buyers actually qualify for.
How to Buy a Car With No Money Down
So how can you get a good deal without a down payment? Follow these six steps.
Step #1: Check Your Credit Score
Before you apply for any type of loan, you should start by checking your credit score — because a better score usually means a better loan. It's a good idea to review your credit report (which is where your credit score comes from). You can get a free copy of your credit report from AnnualCreditReport.com, which lets you access your credit information from the three credit agencies: Experian, TransUnion, and Equifax.
Once you have a copy of your credit report, it's important to review it for errors. If you find any errors, you should get them corrected before applying for a loan — because a negative mark on your credit can have a big impact on your score.
Step #2: Decide How Much Car You Can Afford
That brand new $36,000 SUV may be tempting, but it's not a practical buy if you're struggling to afford a down payment in the first place. Consider how much money you could afford to spend on a car payment every month and then use an auto loan calculator to find out what that means for total cost. You can experiment with different purchase prices, loan terms, and rates to find your ideal monthly payment.
Just remember to be honest with yourself about what you can afford and not stretch your monthly budget to the limit. If in doubt, aim for a slightly lower monthly payment so you have a little extra cash to save — or just in case of emergency.
Step #3: Don't Forget Other Expenses
Even though you know how much you can afford every month, you need to remember the cost of the car isn't the only expense of ownership. You'll have to pay for gas, insurance, and repairs — and these costs vary from car to car. Before you buy, you'll want to consider these costs, too:
- The car's gas mileage, which tells you how much you'll spend to keep your new car going.
- Insurance costs, which you should check out with your insurance agent in advance.
- Repair costs, which can vary depending on make and model. Use Consumer Reports' repair estimator to see what a vehicle you're considering will cost in maintenance over time.
Step #4: Set Up Your Financing in Advance
You've checked your credit score and decided how much you can afford. Now, it's time to apply for a loan. Getting your financing before you head to the dealership lets you lock in a good deal while avoid the hard sell from a salesperson at the dealership.
Step #5: Research Lenders
You'll have to shop around a bit to find a lender who will offer you a good loan without a down payment. While you can get a car without a down payment, it's not always easy to do so. Look at different lenders online and compare your options.
Step #6: Consider Using a Cosigner
If you need to improve your credit score or you just don't have a long enough credit history, buying a car with a zero down payment could make it difficult to qualify for a loan. Since your loan amount will be larger than it would with a down payment, it means your monthly payment will be higher. If you don't qualify for a loan, you can use a cosigner. A cosigner with a high credit score and strong repayment history will help you get approved for an affordable loan.
Your Next Steps
Now that you're ready to get that car with no money down, you can start your online research. You'll be on the road enjoying your new ride in no time.
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