How to Get a Car With No Down Payment

You can get a car with no down payment, whether you lease a car with no money down or get auto financing without a down payment. Most dealerships don’t require a down payment if you have good credit. However, a down payment can have several benefits besides lowering your car financing amount. 

Pros and cons of buying a car with no down payment

Buying a car with no down payment can help put you in the driver’s seat. Nonetheless, down payments do serve a purpose when used correctly. Read on to learn more about the pros and cons of buying a car with no money down. 

Avoiding a down payment can bring the following benefits: 

• Easier to afford a car loan
• Doesn’t require a lump sum of savings
• Allows you to address other debts, invest, or save
• On-time car payments can help improve your bad credit score 
• Keeps your rainy day or emergency savings intact

However, a lack of a down payment can result in the following: 

• A down payment can help offset a lack of credit history
• Alternative to gaining loan approval without a cosigner
• Doesn’t reduce your financed amount and monthly payments 
• Can’t help pay the sales tax, documentation fees, and dealership fees  
• Often results in longer loan terms
• The loan comes with higher interest rates
• Dealerships may require payments weekly or bi-weekly rather than monthly 
• Risk of negative equity 
• Cannot use down payment as a negotiating tool

Most dealerships will offer their best terms to individuals with credit scores over 700 without requiring a down payment to sweeten the pot. You typically need a high credit score to make the most of no down payment car loans. Down payments help reduce the interest rate and financed amount, which you can accomplish with a higher credit score and a little negotiating. 

Financing a car purchase with no down payment, also called 100% financing, can pose a challenge if you have poor credit. Dealerships award potential buyers with lower credit scores a higher interest rate to reflect the increase in risk they present. A down payment can reduce that risk by demonstrating a potential buyer’s intent to repay the loan. Without that down payment in play, buyers lose the opportunity to demonstrate their creditworthiness. 

As counterintuitive as it sounds, many car buyers use their initial car loans to improve their credit to obtain a lower interest rate on their next auto loan. On-time payments, credit mix, and new credit can help boost your credit score. However, depending on your financial circumstances, knowing how much your credit score increases after paying off a car can be challenging. 

Obtaining a new car loan without putting any money down upfront is possible, but these deals are getting harder to find. Here’s how you can get a car without putting money down. 

Verify and improve your credit score

The first step in learning how to buy your first car is understanding how your credit score factors into your monthly payments. Higher credit scores demonstrate to lenders that you’re trustworthy and pay back your loans on time. Request your credit report and review the information listed there. If anything is entered incorrectly, address them as soon as possible, as resolving the errors can result in a higher credit score. 

Research lenders and shop around

Many car dealerships advertise car loans with no down payments. It pays to shop around and compare rates and specifics to see which dealerships provide the best deals. While most dealerships will require a pre-approval, risking the ding to your credit can be worthwhile. You can even use your research of cheaper rates in your negotiations. 

Get a cosigner

Finding someone to vouch for you financially can also increase your eligibility for car loans with no down payment required. Cosigners should have a higher credit score than you and be willing to pay your monthly payments if you default. Many first-time car owners call upon their parents to be a cosigner on their initial car loan.  

Consider your alternatives

Sometimes, qualifying for a no down payment car loan requires looking at more affordable cars and payment options. You can also look into leasing a vehicle instead. Driving the car you’ve got now (if you have one) can also give you time to increase your credit score and savings. A car subscription like FINN offers can also give you time to reassess your situation and better position yourself for financing options.  

For every $1,000 you put down, you can lower your monthly car payment by around $20. Saving for a down payment can take a few months, so planning ahead is critical. If you’re trying to save for a down payment, consider the following options: 

• Create and stick to a monthly budget
• Cook more at home instead of going out
• Avoid impulse buys and only buy necessities
• Open a savings account and set up automatic transfers
• Take on a part-time job or side hustle
• Put in overtime hours at your current job, if possible  

Remember that down payments have a point of diminishing returns. In other words, putting too much down won’t improve your situation any further. Going over 20% or even 15% of the purchase price regarding what you put down can be a foolhardy move, especially if you have other debts to pay or want to start an emergency fund. 

While saving for a down payment on the car you want to purchase, check out a FINN car subscription. FINN’s car subscriptions offer six and 12-month terms on various makes and models, from the Audi Q5 S Line, Jeep Grand Cherokee, and GMC Sierra 1500 to the Nissan Pathfinder. You can resubscribe once your subscription expires until you’ve saved enough money for your desired car. 

Buying a car with no money can help you afford it, but it’s not the smartest choice. The lack of a down payment means the loan will incur more interest over the lifetime, forcing you to pay more for the car than you would if you’d put money down. A down payment can also help you stay “above water” on a car loan. “Above water” means that the car is worth more than you owe, but without a down payment, you could be “underwater” or upside down for some time. 

Not all dealerships allow you to drive away with a car without putting money down. Dealerships assess risk when considering applicants for a car loan and grant applications accordingly. The higher the risk you pose, the more likely you’ll need to pay a down payment to offset your particular risk factors. 

FINN car subscriptions come with no down payment if you meet credit score requirements. Otherwise, you’re assessed a security deposit before making your subscription selection. FINN’s car subscription network offers drivers numerous options, including electric cars, trucks, SUVs, and more.