Your stimulus check could pay for a down payment on a car – is that a good idea?

Posted: 17 March 2021 6:19 pm

$1,400 can be part of a sizable down payment on a car, but there are other expenses you should tackle first.

Interest rates have remained low for new and used cars — for many, this means an APR under 10%. Manufacturers also continue to offer 0% APR deals for many new models. With the market this versatile, using your next stimulus check, or Economic Impact Payment, as part of your down payment can be tempting. And if you have a steady source of income and decent credit, it can be a worthwhile way to make use of the third stimulus.

3 ways to use your stimulus check

If you’re set on buying a car, here are two ways the stimulus can make a difference — and one way to handle a current loan.

Fund a new car

New cars mean high price tags, and high price tags mean you’ll need a larger down payment. For individuals and married couples without dependents, a $1,400 or $1,800 check likely won’t cover the full down payment on a new car. However, your stimulus can supplement your current down payment.

Fortunately, you’ll find that many manufacturers have special deals on their new cars. Between cashback deals and 0% financing for 60 or more months, you could take advantage of low monthly payments while avoiding interest. While these deals are exclusive to borrowers with excellent credit, you may be able to score a low interest rate anyway. The average interest rate on a 60-month new car loan was 4.8% in late 2020, according to data from the Federal Reserve.

Fund a used car

Using your $1,400 — or more — stimulus money as a down payment on a used car makes more financial sense. Not only are used cars less expensive overall, but you won’t be losing as much money on depreciation when you buy used.

But you won’t see many special deals on financing. For most people, it won’t matter much: It’s rare to qualify for a 0% APR. You’ll save money with a used car, even with a higher interest rate, and your stimulus check can make a good dent in your down payment.

Pay down your existing loan

You can pay off your car loan early with your stimulus check as well. This can be especially useful if you have a high APR because you’ll ultimately save on interest by reducing your loan balance. To get started, contact your lender to request your car loan payoff amount. You don’t have to put your whole stimulus toward your loan, either. Even paying slightly more than the minimum monthly payment can make a difference in the total cost.

When to avoid using a stimulus check as a down payment

Provided you already have a reliable vehicle, there are a few ways you could put your stimulus money to better use.

  • You have large bills or credit card debt. Before you buy a car, consider putting your stimulus check toward any large bills or high-interest credit card debt you have.
  • You need to build savings. With the economy still slowly recovering, your stimulus check may be better in a savings account to prepare for the future.
  • You don’t have the rest of a down payment. Car-buying experts suggest a down payment of 20% — and with new cars averaging over $35,000, most people will need to supplement their down payments with additional savings.
  • You don’t have a steady source of income. Uncertain hours and employment may mean it’s not the right time for a car loan. Unless you need an upgrade, put your stimulus toward savings or other debts.

Where to compare car loans

If you’re ready to buy a car, you can compare car loans for new and used cars. This will allow you to apply for preapproval before you visit a dealership, which in turn will help you get the best deal for your car.

You can also browse our list of car-buying apps to check listings in your area, look up vehicle history and make sure the sticker price on your dream car is competitive.


Ask an Expert provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site