How to Make a Down Payment on a Car

by Chris Miksen ; Updated June 29, 2018
How to Make a Down Payment on a Car

When purchasing a car, you have the option to buy the car outright, obtain financing from your bank or obtain financing at the dealership. A down payment is money paid upfront to a dealership and serves as a way to lessen the impact of a car loan by lowering your monthly payments. Because a down payment reduces the amount of money you need to borrow, your interest rate on a loan may be less than it would be if you didn't make a down payment at all. The down payment is made at the dealership, and if you have excellent credit, you may not be required to make one.

Weighing Your Options

Decide if you want to lease or finance the car. Down payments are typically required and almost always advised when financing a car, but rarely required and almost never advised when leasing a car. Determine the maximum down payment you can make. Autotrader explains that a 20 percent down payment is ideal because the down payment pays off the car’s first year deprecation. However, if making a 20 percent down payment will put a strain on your finances, make a lesser down payment, such as 15 or 10 percent, but your loan amount will be slightly larger. You can also make a down payment of more than 20 percent, if you wish to further reduce your monthly payments.

Accepted Forms of Down Payment

Before you get the opportunity to drive off in your new car, first you must obtain financing and provide the dealer with the down payment, as well as completing the purchase contract or agreement. The type of down payment accepted varies from car dealership to car dealership, however, most car dealerships accept down payments in the form of cash, checks or debit cards.

When using cash, be careful and make sure you receive a receipt and other documentation that leaves a paper trail should the deal go south. Whenever possible, see if a dealership accepts a debit card as payment. This affords you more protection and leaves a digital record of your down payment. If the dealership accepts debit cards, then chances are that it will also accept credit cards. Because of high interest rates and other associated fees, making a down payment with a credit card should be your last resort. It's wise to think twice before putting a down payment for a car on a credit card, unless you can pay it off before your next billing cycle.

About the Author

Located in Pittsburgh, Chris Miksen has been writing instructional articles on a wide range of topics for online publications since 2007. He currently owns and operates a vending business. Miksen has written a variety of technical and business articles throughout his writing career. He studied journalism at the Community College of Allegheny County.

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