The “No Money Down” Myth

Posted Tuesday, Jul 16, 2019

Some customers have a misconception that in the used car business they can buy a used car with no money down.  This idea likely stems from new car stores that promote this type of offer.  New car dealers can apply factory rebates and incentives to the purchase of a new car which in turn can be used as a down payment, so the buyer doesn’t have to put any money down out of their pocket.  This gives the illusion of not putting any money down.  In most cases, you must qualify for “no money down” so if your credit is not strong enough you will have to put money down.

Unfortunately, with a used car there are no incentives or rebates and banks are not willing to finance one hundred percent of a used car plus the tax, tag, and any fees.  Banks often base their financing on NADA clean trade value and are only able to lend based on that number which leaves the customer having to come up with any leftover money owed to the dealer as a down payment.  For example, if you are buying a vehicle and the total out the door price is $10500.00 but NADA clean trade value is only $9000.00 then you would have to put $1500.00 down.

Banks also want to protect themselves in case they have to repossess a vehicle.  If they loaned all of the money to buy the car and then had to repossess it within the first two years they would suffer a large loss selling it at an auction.  Lowering the risk of a loan in the used car market is one of the major reasons why it is difficult to buy a used car with no money down.  Banks are not willing to finance a used car for more than it is worth and when you couple that with a customer who does not have the best credit you can see why you have to put some money down.

Wondering how much you might have to put down for the vehicle you're interested in?  The best way to figure this out is to fill out our easy credit application.  Or, go ahead and give us a call.  We'd be happy to speak with you about your financing needs.