It's possible to buy a vehicle with no money down, but typically only if you have good credit. Dealerships may advertise that they offer zero down cars, but the fine print almost always reveals that these types of offers are reserved for buyers with the best credit.
0 Down Car Loan Options
A zero down car loan option isn't common for the majority of buyers. While dealerships like to throw around the terms "no money down" or "zero down" in their advertising, there's always a catch. A close look at the fine print reveals a number of qualifiers. Having an excellent credit score is almost always among them.
So, buyers with good credit may be able to get approved for a zero down car, but borrowers with less than perfect are going to have a tougher time qualifying. Not to mention, zero down car offers may even come with a higher interest rate, so it's not always as good of a deal as it's made out to be.
Where Can You Get a Car with No Down Payment?
Dealerships may be the ones that advertise zero down vehicles, but this is a bit misleading. The fact of the matter is that dealers aren't the ones who require a down payment – it's the lenders they work with that do.
There are certain types of dealerships that finance loans in-house, often referred to as buy here pay here or tote the note dealers. The main advantage of these types of dealerships is that their requirements are often less strict than a traditional lender, and they're known for not performing credit checks. However, even in-house financing dealers almost always have a down payment requirement.
How to Get 0 Down Cars
To get a zero down car, you have to be able to meet the strict qualifications no money down loans typically come with. If you can't, your best bet is to get pre-approved with a direct lender like a bank or credit union. You can apply for an auto loan directly with one of these lenders, and, if approved, get a check you can use to buy a car from a dealership or private seller without needing a down payment.
A good tip to follow if you go this route is to rate shop. By applying with multiple lenders in a short period of time, you can see which can offer you the best interest rate. If you do this in a period of 14 days or less, your credit score is only affected as if one hard inquiry was performed, regardless of how many lenders you apply with for the same type of credit.
Unfortunately, there's yet another catch: most direct lenders have strict credit score requirements. It's hard to get approved for a direct auto loan unless you meet their credit standards. This means borrowers with bad credit are probably out of luck in their search for a zero down car once again.
Bad Credit and Down Payments on a Car
If you have poor credit and need an auto loan, your best shot at an approval is often through a special finance dealership. These types of dealers are signed up with subprime lenders, who are more willing to finance borrowers with bad credit.
Subprime lenders nearly always require a down payment, so getting approved with zero down isn't generally an option. However, they often only require just a small amount, with a down payment of 10 percent of the car's selling price or $1,000 (whichever is less) being the typical industry standard.
The down payment can be paid in cash, trade-in equity, or a combination of both. So, if you have a vehicle to trade in that's paid off or with equity, it can be almost as if you don’t have to put money down.
The Bottom Line
If you don't have great credit, it's very difficult to get approved for a no money down car loan. Thankfully, most bad credit lenders only ask for a small minimum down payment, so you don't have to break the bank.
If you have a down payment saved up and are ready to buy, Drivers Lane can help you get connected to a local dealership. We work with special finance dealers all across the country that are experts at helping people with less than perfect credit get financed. We'll work to match you with a dealership near you if you start the process by submitting our free and secure auto loan request form. Get started today!