How To Get A Car Loan With No Down Payment In 2024 (2024)

In 2021, 91.7% of households had at least one vehicle, according to the latest U.S. Census data. Yet vehicle owners are paying the price, as supply shortages and soaring dealership prices force auto lenders to charge higher interest rates and expenses to mitigate financial risk.

Buyers are putting down increasingly large down payments before driving off the lot. For new vehicles, lenders typically require a down payment of at least 20%. With an average new vehicle price of about $48,000, most buyers are looking at a minimum down payment of $10,000. However, there are ways for buyers to get a car loan with no down payment.

Can I Get a Car Loan With No Down Payment?

Many lenders offer the most favorable auto loan rates to buyers with good or excellent credit and a proven track record of making payments on time and in full. Loans with no down payment are typically offered based on the same criteria. Even so, lenders may also offer no down payment options if you have bad credit—but at the cost of high interest rates.

Before applying for a loan with no down payment, understand the risks. No down payment loans typically come with higher interest rates and larger monthly payments, making them unaffordable for some buyers. But if you can afford the monthly payments, you can pay less upfront and skip the time to save up for a down payment.

4 Ways To Get a Car With No Down Payment

If you decide to pursue a zero-down loan, you should put yourself in the best position to acquire one. There are four ways to qualify for 100% financing:

1. Negotiate a Higher Monthly Payment

The size of your monthly payments reflects your down payment amount. A larger down payment typically results in lower monthly payments, and most buyers seek to put down as much as possible upfront. Down payments also eliminate lender risk, allowing for lower interest rates and monthly payments.

You can, however, negotiate a higher monthly payment with lenders to avoid a down payment. Note that higher monthly payments usually coincide with higher interest rates.

For example, let’s say you have a $25,000 loan for a car with a 5% interest rate over 72 months. With a 20% down payment of $5,000, you’ll pay $322 monthly and $3,191 in overall interest. However, with no down payment, you’ll pay $403 monthly and $3,988 in overall interest.

Be sure to account for the higher interest rates and payments before negotiating a no down payment loan.

2. Boost Your Credit Score

Your credit score is crucial to determine your eligibility for a no down payment car loan. Most lenders require a FICO credit score of at least 680 before you can qualify.

If your credit score falls below 680, improve your credit score before you apply to help you qualify in the future. You can review your credit reports, keep track of your score, make your monthly bill payments on time and monitor your credit score regularly. You should also aim to keep your credit utilization ratio—your credit card balances compared to your total available credit—below 30%.

3. Apply With a Co-Signer

Getting a family member or a friend with a strong credit score to co-sign your loan could help you qualify for a zero-down car loan—especially if you have poor credit. A co-signer agrees to take responsibility for your debt and payment if you fail to repay.

If you default on payments, your credit score and your co-signer’s credit score can suffer. As such, defaulting can jeopardize your relationship with them if they’re a close family member or friend. To mitigate this, make sure that you communicate with your co-signer and keep record of all transactions about the loan.

However, not all lenders accommodate co-signers, so research multiple lenders before applying if you want to go this route.

4. Shop Around and Compare Lenders

Car loan offers can vary depending on the lenders and where they operate, market prices and other factors. Therefore, don’t be afraid to shop around when selecting a loan. Consider loan sources like banks, dealerships, credit unions or online lenders that offer specialized loans and no down payment options.

It’s also vital to keep track of the average auto loan rates during your search. Understanding the market rates can aid you when negotiating with different lenders, ensuring you receive a fair rate.

Strategies To Save for a Down Payment

A no down payment loan can be a great option to mitigate upfront expenses and put you in the driver’s seat faster. However, these loans often come with higher monthly payments, interest rates and longer loan terms, which can cost you more over time.

If you can’t accommodate these conditions, saving for a down payment may be your best option. Once you determine your down payment amount, consider these strategies to help you save for it:

• Create a savings plan. Keep track of your income and expenses, develop a savings plan to distribute your funds efficiently and work toward your down payment. For example, the 50/30/20 budget rule is a popular budgeting method that divides your income into three categories: 50% for needs, 30% for wants and 20% for savings. You can adjust the ratio and divide your funds as you see fit. However, it’s good practice to save at least 20% of your income monthly.
• Open a designated savings account. Having a separate savings account can help you keep track of your savings and avoid misusing your money. It also makes it easier to track your progress toward a specific monetary goal, such as a loan down payment sum. A high-yield savings account may be a good option, as it allows you to grow your money with interest over time.
• Establish an additional stream of income. If your primary source of income is dedicated to bills and other expenses, dedicating another income stream to your savings could allow you to accumulate funds faster. Additional income could come from a part-time job, freelance work or selling products or services online.
• Cut unnecessary expenses. You may want to eliminate nonessential expenses, regardless of how big or small. Nonessential expenses could include gym memberships, retail shopping or vacation spending. However, this doesn’t have to be permanent.

Consistency and planning are the fuel for saving funds quickly and efficiently. Rev up your determination to use one or more of the methods above, and you’ll be on a speedy route to down payment savings.