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Car loans with no down payment

You don't need one, but it will end up costing you more.

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By

Kellye Guinan

Updated

Fact checked

There are many lenders that offer zero-down car loans — but you might have to meet certain requirements to qualify.

Can I get a car loan with no down payment?

Yes, you don’t necessarily need a down payment, but it will cost you more. Even a small down payment or a trade-in can help reduce how much you’ll pay. If not, you may end up with a higher interest rate — which means higher monthly payments and more money spent overall.

What do I need to qualify?

While the eligibility requirements for a zero-down car loan vary by lender, you generally need to meet the following criteria to qualify:

  • Steady source of income
  • Good to excellent credit
  • At least 18 years old
  • US citizen or permanent resident

6 tips to get a good deal on a zero-down car loan

If you don’t have any money to make a down payment, these tips can help you save:

  1. Shop around to find the best rate. Applying for preapproval with multiple lenders can help you find the lowest rate available to you. Banks, credit unions and private lenders all have car loan options for you to choose from.
  2. Improve your credit score. If you don’t need a car right away, take the time to improve your credit score. The better your score — and credit history — the more likely you’ll be to get the down payment requirement waived.
  3. Buy used. Used cars are less expensive and can be just as reliable as a new car. And the less you need to borrow, the less you’ll spend overall — even if you get a slightly higher APR.
  4. Trade in your last car. If you’re able, get some money for your previous ride. This can act as a substitute for a down payment in many cases. You can even shop your trade-in at different dealerships to find the best deal.
  5. Add a cosigner. A cosigner may decrease the APR you’re offered if you don’t have a down payment. And if your credit score is subprime, it may also increase your chances of approval.
  6. Avoid add-ons. Common add-ons like gap insurance and extended warranties typically never get used but still cost quite a bit. Without a down payment, you’re more at risk of being upside-down on your loan.

Try to make a minimal down payment

While it can be tempting to finance the entire cost, even a small down payment can save you hundreds of dollars in interest. This will help lower your monthly payment, and your lender may even charge you a lower APR. The recommended down payment is 20% — but many lenders accept down payments as small as 10%.

Without a down payment, you may end up owing more on your car than it’s worth. Avoid loss down the road by putting something up front.

What is the cost of buying a car with no money down?

Lenders may quote a higher interest rate when you don’t have a down payment. In addition, you’ll have to pay title and registration fees, sales tax and other loan fees. If you don’t have a down payment, these fees will be added on to your loan, which can make it easy to borrow more than your car is worth.

For example, a $20,000 car may end up costing $23,000 when all the dealership fees, registration costs, taxes and loan fees are accounted for. Without a down payment, you’ll need to finance 100% of the cost. And after you factor in depreciation — which will lower your car’s value whether you buy new or used — you could end up upside down on your car loan. It may mean less money up front, but you’ll likely end up paying more overall.

Why didn’t I qualify for a zero-down car loan?

Lenders are less likely to offer car loans without a down payment because of the extra risk. You may not have been approved for a few reasons:

  • Limited credit history. Lenders want to see borrowers with a history of on-time payments. If a lender can’t examine your track record as a borrower and you have nothing saved up, you’re less likely to be approved.
  • Bad credit history. Borrowers with poor credit — also called subprime borrowers — are viewed as posing a higher risk to lenders. Most will require you to have a down payment saved if you want to qualify.
  • Negative equity on your current car. If the value of your current car is less than the outstanding balance on your loan, your lender will likely require a down payment to make up for the extra amount you need to borrow to pay off your previous loan.
  • Loan amount exceeds the car’s value. In some cases, the amount you need to borrow may be well above the car’s value. When this happens, you may need a down payment to fall within the lender’s loan-to-value (LTV) guidelines.

Compare car loans

1 - 3 of 3
Updated regularly
Name Product Filter Values Minimum credit score APR Loan term Requirements
PenFed Auto Loans
PenFed Auto Loans
Varies
Starting at 5.19%
3 to 7 years
Active membership with PenFed
One of the largest national credit unions in the U.S., it offers new and used auto financing with transparent low rates.
Go to site
More Info
CarGurus
CarGurus
Varies
Varies depending on the lender
3 to 6 years
Varies depending on the lender
Go to site
Carvana
Carvana
No minimum credit score
3.9% to 27.9%
1 to 6 years
18+ years old, annual income of $4,000+, no active bankruptcies
Get pre-qualified for used car financing and receive competitive, personalized rates.
Go to site
More Info
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Bottom line

If you have good credit, a zero-down car loan could help you buy a car without needing to save up for a down payment. But don’t jump on the first loan you find. To get the best deal, compare your options first.

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