What is a good down payment for a used car?

[Granny_Weatherwax]

Is there a certain percentage? An amount?

Here's a scenario for you...

$23,000 2019 Toyota CHR

$5000.00 down payment

No trade in, buying outright

Young adult was thrilled to have saved the $5000 and told the salesman "I have a really good down payment." but didn't specify the amount.

During the negotiations, the finance manager asked what the down payment was and YA said "$5000.00". He was met with a surprised look and the comment "Oh, I thought you had a good down payment."  All of the finance paperwork was based on $10,000,  $15,000, and $20,000 down payments. YA was struck dumb.

 

So, what says the hive? Is a $5000 down payment considered paltry or good? 

YA commented to me at some point "If I had $20,000 to put down, I wouldn't need to finance a $23,000 car."

 

[vonfirmath]

We just put down $10K and still ended up with a pretty hefty finance. Used cars are expensive right now.

(OTOH the finance paperwork they gave us originally started assuming $5K. I think $5K may be considered a typical down payment)

 

Edited January 28, 2022 by vonfirmath

[Faith-manor]

Here the size of down payment considered good is actually based on credit rating. So that might be part of it for a young man. The lower the credit rating, the more investment skin the game the bank wants for the riskier buyer or young person.

[Sneezyone]

2 hours ago, Granny_Weatherwax said:

Is there a certain percentage? An amount?

Here's a scenario for you...

$23,000 2019 Toyota CHR

$5000.00 down payment

No trade in, buying outright

Young adult was thrilled to have saved the $5000 and told the salesman "I have a really good down payment." but didn't specify the amount.

During the negotiations, the finance manager asked what the down payment was and YA said "$5000.00". He was met with a surprised look and the comment "Oh, I thought you had a good down payment."  All of the finance paperwork was based on $10,000,  $15,000, and $20,000 down payments. YA was struck dumb.

 

So, what says the hive? Is a $5000 down payment considered paltry or good? 

YA commented to me at some point "If I had $20,000 to put down, I wouldn't need to finance a $23,000 car."

 

5k is a good down payment but not for a first-time buyer with limited credit history. Our first purchases (DH and I) had stupid terms too. It’s why we went with cash cars for our peeps so when they go to finance they’ll have both something to trade and some credit history. DD is adding DH to his cards when she turns 18 this fall (unbeknownst to her).

Edited January 28, 2022 by Sneezyone

[Arcadia]

13 minutes ago, Faith-manor said:

Here the size of down payment considered good is actually based on credit rating.

Same here. $5k downpayment for a car would be considered good enough if the car loan is under my husband’s name. Here young adults typically go with a parent, less common for a young adult to go car shopping alone.

[Scarlett]

2 hours ago, Granny_Weatherwax said:

Is there a certain percentage? An amount?

Here's a scenario for you...

$23,000 2019 Toyota CHR

$5000.00 down payment

No trade in, buying outright

Young adult was thrilled to have saved the $5000 and told the salesman "I have a really good down payment." but didn't specify the amount.

During the negotiations, the finance manager asked what the down payment was and YA said "$5000.00". He was met with a surprised look and the comment "Oh, I thought you had a good down payment."  All of the finance paperwork was based on $10,000,  $15,000, and $20,000 down payments. YA was struck dumb.

 

So, what says the hive? Is a $5000 down payment considered paltry or good? 

YA commented to me at some point "If I had $20,000 to put down, I wouldn't need to finance a $23,000 car."

 

I think that is a good down payment.  That is almost 20%.  

[marbel]

Does he have any credit history? Has he tried getting a loan thru his own bank or credit union? They would likely have better terms and may be more amenable to a loan sine there is a relationship. 

[Starr]

Also check with your local credit unions. We get better rates there.

[DreamerGirl]

Good down payment especially if the YA has worked and saved it by himself.

Can you get a loan from a bank or a credit union ? Dealerships generally tend to slam people with little credit history in my experience.

When I was relatively brand new and apparently wearing a sign, walked myself to a dealership having saved a down payment very proudly for a brand new car. Did not know about used cars, did not know what exactly was meant by a lease and almost walked out signing a lease because it was cheaper 🙄. I grew up learning to shop around, so I did not sign.

Next time went with a friend's dad, was offered a high interest rate due to lack of credit. But he haggled the price down because of the down payment.

I got a loan from the bank. The dealership was too much.

Shop around for loans.

Edited January 28, 2022 by DreamerGirl

[Granny_Weatherwax]

15 minutes ago, marbel said:

Does he have any credit history? Has he tried getting a loan thru his own bank or credit union? They would likely have better terms and may be more amenable to a loan sine there is a relationship. 

Yes, some. He's been on my credit card for years and had student loans which he paid off within a year of graduation. He recently opened his own account for the cash back and travel benefits.

We took him to our credit union this morning and he was given a wonderful interest rate. The CU loan officer was happy to learn about DS's financial history and they discussed a number of issues about car salesmen, surprise fees, and how they try to get more money out of buyers. 

He is now pre-approved and has a letter of pre-qualification to take with him when he goes looking again.

[Granny_Weatherwax]

16 minutes ago, Starr said:

Also check with your local credit unions. We get better rates there.

Yes. The dealership offered him 8.1% for 78 months.  The CU offered him 2.4% for 60 months. The CU's payment was less even with the shorter term.

 

Edited January 28, 2022 by Granny_Weatherwax

[Tap]

I would consider any down payment that left a vehicle close to being upside down in debt/value ratio is not a good down payment. 
 

Putting 5000 towards a 23000 car ( plus tax/title/insurance) most likely leaves it close to being upside down. So, no I wouldn’t consider that good….maybe average for a regular buyer but not good. 

[BlsdMama]

1 hour ago, marbel said:

Does he have any credit history? Has he tried getting a loan thru his own bank or credit union? They would likely have better terms and may be more amenable to a loan sine there is a relationship. 

This. You should never go into car buying without reapproval through your credit Union. If the dealership has 0 APR, I’d still want my practical as a bargaining chip. It was a ploy IMO to stick him with a higher rate. 
The bargaining is in your favor when you have the money lined up. DS got his first car loan at 19 with $1k down - I think the car was $7,000 ballpark. 

[Frances]

2 hours ago, Sneezyone said:

5k is a good down payment but not for a first-time buyer with limited credit history. Our first purchases (DH and I) had stupid terms too. It’s why we went with cash cars for our peeps so when they go to finance they’ll have both something to trade and some credit history. DD is adding DH to his cards when she turns 18 this fall (unbeknownst to her).

Is your DH adding DD or DD adding DH? We added our son when he was a teen and it definitely helped his credit score. He’s only bought cars with cash, but his car insurance agent told him he had never seen a credit score that high before for a young adult. So it can help beyond just financing.

[Soror]

3 hours ago, Sneezyone said:

5k is a good down payment but not for a first-time buyer with limited credit history. Our first purchases (DH and I) had stupid terms too. It’s why we went with cash cars for our peeps so when they go to finance they’ll have both something to trade and some credit history. DD is adding DH to his cards when she turns 18 this fall (unbeknownst to her).

 

45 minutes ago, Frances said:

Is your DH adding DD or DD adding DH? We added our son when he was a teen and it definitely helped his credit score. He’s only bought cars with cash, but his car insurance agent told him he had never seen a credit score that high before for a young adult. So it can help beyond just financing.

Yes, both of my teens are already authorized users and have their cards on our accounts. Check your cards to make sure whatever you have that will report authorized users for credit reports. 

[Soror]

I would consider a good down payment to be approaching half. We are strongly encouraging them to save up and pay cash or at least 50%. D's should have nearly 7k towards a vehicle by the end of summer from his PT work and he's not great with money.

[Carrie12345]

Today’s car market is all messed up. But a lot of salespeople are also all messed up. My skeptical self would jump to the possibility of the salesperson “priming “ a young buyer for being grateful for a garbage deal. “Oh, in THAT case, I’ll work real hard to get you only a few thousand more over the course of the loan.”

(Not really. They don’t want you to know what you’re paying over the course of the loan.)

[vonfirmath]

Yes. I messed up at our last car negotiations.

I KNOW not to negotiate a car based on payment. But I let that be basically the only information I got until we were signing papers.