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What is considered a good down payment by lenders?

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cottoncrown
Frequent Contributor

What is considered a good down payment by lenders?

I am looking into buying a new car that will cost about 17,000 and I have a short but very good credit history. What size of deposit will look good the most lenders? I was thinking 20% so a down payment of 3500$. What do you think "looks good" to lenders?
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sdotlow
Established Member

Re: What is considered a good down payment by lenders?

It's relative to your situation.

 

If you're young and this is your first car, they may require you to have 20% down.  Some places require your first car loan ot be a percentage of your annual income (I was quoted 20% down, and the loan would be max of 50% of my annual income).  I found other places that did not have that requirement.

 

It also allows you to lower your car payment, and subsequently lower your DTI, making the lender feel better.  The more you have down, the less the loan has to be, the less in monthly payments you'll have to make, and the safer they'll feel about you being able to make those payments.

 

That being said, having a down payment is always a good idea.  When you drive the car off of the lot, it literally drops in value by 15-20%.  So if you get in an accident and total it the next day, the insurance company is only going to give you that, so you'll still be paying the car note on whatever the difference is.


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