How To Get a Car Loan With No Down Payment in 2024

Vault’s Viewpoint

• You may be able to get a car loan with no down payment but will likely pay a higher interest rate.
• While a no down payment car loan can give you faster access to your car and keep your savings intact, it will cost you more in the long run.
• If possible, it’s a good idea to save for a down payment and reduce your overall cost of borrowing.

8 Strategies To Buy a Car With No Down Payment

While it may be a challenge to get a car loan with no down payment, it’s certainly not impossible. If you’re looking for a car loan with no money down, these tips can come in handy.

1. Shop Around

Not all car loans are created equal. Since they depend on factors like location, lender and market prices, it’s a good idea to explore all your options at banks, credit unions, car dealerships and online lenders who offer car loans with no down payment. As you do so, compare rates, terms and fees so you can zero in on the ideal loan for your unique budget and needs.

2. Negotiate a Higher Monthly Payment

Monthly payments and down payments go hand in hand. In general, a larger down payment on a car loan leads to lower monthly payments. More money down also reduces risk and is therefore preferred by most lenders. However, you can still try to negotiate a higher monthly payment to avoid a down payment. Keep in mind that if you go this route, you’ll likely have to settle for a higher interest rate.

3. Maximize Your Trade-In Value

Through a trade-in, you can sell your current vehicle to a dealership and apply the credit to a new or used car, reducing the amount you need for a car loan and down payment. Depending on the dealership, you may even use the trade-in value as the down payment itself.

Before you go ahead and trade in your car, do your research. Go to reputable websites like Edmunds or Kelley Blue Book so that you know exactly how much it’s worth and can negotiate strategically. Investing in a car wash and car detailing as well as repairing any minor issues like scratches and dents can also boost your trade-in value.

4. Choose a Cheaper Vehicle

While it may be tempting to buy the latest and greatest SUV with all the bells and whistles, you’ll find it easier to qualify for a car loan with no down payment if you choose a less expensive vehicle. Here’s why: A cheaper car means a smaller loan amount and is, in turn, less risky for a lender. Lenders will be more likely to approve you for a car loan on an entry-level sedan or used SUV, even if you don’t have a down payment. You can always upgrade your car in the future.

5. Apply With a Co-signer

A co-signer can be a trustworthy friend or family member with good credit and a stable income. If you apply for a car loan with them, you might secure a zero down payment car loan and a lower interest rate. However, the caveat of a co-signer is that they’ll have to cover your payments if you default on your loan. In the event this happens, you may hurt their credit score and tarnish your relationship with them.

6. Boost Your Credit Score

Most lenders look for a minimum credit score of 680. If your score falls below that threshold, you might want to improve it before you apply for a car loan with no down payment. To start, visit AnnualCreditReport.com and pull free copies of your credit reports. Review each report carefully and dispute any errors you find with the appropriate lender. You should also pay all your bills on time, repay your debt and keep old credit accounts open.

7. Use a Credit Card

Some car dealerships will let you cover a down payment with a credit card. While this isn’t the best option as it will increase your debt load, it might make sense if you have no other way to get a loan and need a car as soon as possible. If you do use a credit card to pay for a down payment, you’ll likely be charged an additional fee. Do your best to pay it off as soon as possible to keep interest charges down.

8. Delay Your Car Purchase

If you can’t afford a down payment for the vehicle you want, you might want to postpone your purchase. This way you can save some money for a down payment and open the doors to better rates and terms in the future. If you don’t need a car right away and can get around with your current vehicle, a loved one’s car or public transportation in the meantime, waiting can save you hundreds or thousands of dollars.

Pros and Cons of Buying a Car With No Down Payment

A car loan with no down payment comes with benefits and drawbacks you should consider, including:

Pros

• Faster access to your car: The most obvious advantage of a no down payment car loan is the fact that you can get a new or used car quickly. If you have no way to get to work or other places you need to go to on a daily basis, this strategy might make sense.
• Keep your existing savings: By forgoing the down payment requirement on a car loan, you can continue to maintain your desired lifestyle. You won’t have to dip into your savings and pull out thousands of dollars.

Cons

• Higher monthly payments: In general, avoiding a down payment results in a higher interest rate. A higher rate can significantly increase the overall cost of your vehicle.
• Limited options: Most lenders require a down payment. If you want to take out a car loan with no down payment, you’ll have to do a lot of research to find lenders with more flexible requirements.
• Potential to owe more than your car is worth: Cars depreciate very quickly. If you get a car loan for the full value of your vehicle, you may eventually go “upside down” or “underwater” and owe more on it than it’s worth.

How To Save for a Down Payment

Since no down payment car loans come with higher interest rates and can cost you thousands of extra dollars over their life, you should save for a down payment if you can. These strategies can help you do so.

• Set up a savings plan: Take a close look at your income and expenses. Then, figure out how much you can save each month for a down payment. This may be 5%, 10%, 20% or more, depending on your particular situation. Once you create a savings plan, be sure to stick to it.
• Open a dedicated savings account: With a separate savings account for your down payment, you’ll find it easier to track your savings and progress. A high-yield savings account is likely your best bet as it can allow you to maximize your interest sayings while withdrawing funds at any time.
• Earn additional income: If you’re struggling to save for a down payment with your primary income, it may be worthwhile to pick up a part-time job or side hustle. You might want to deliver groceries, tutor, sell products online or find freelance work in your industry. You can put all of the extra funds toward your down payment fund.
• Reduce expenses: Pay attention to your credit card bills and bank statements. If you’re spending money on products or services you don’t need, get rid of them. For example, you may find that you have a gym membership you never use or dine out more than you should. The money you save from these unnecessary expenses can help you with your down payment.