Estimate Your Down Payment from Your Credit Score

This post explains how your credit score affects the pricing of your car. 1) we consider the down payment you will most likely be required to pay based on your credit score. 2) we consider the interest rate you will pay and what effect it has on your monthly payment.

Down Payment

Because almost everyone finances a new car, your credit score can limit the type of car you can get. With a large enough down payment, almost anyone can get financed for a new car. Below is a guide that will show you what kind of down payment is required to get financed for your dream car.

  • Below a 550 – you are going to have a hard time getting financed for a brand new car without a large down payment (20% or more).  However, there are websites that will help you finance a used car.  You may have luck financing a car with less of a down payment if you have a decent car payment history (you made your previous car payments on time). Most new car lenders will submit your applications to multiple lenders. It’s really difficult to say what they will eventually require. You’ll just have to go to the car dealership and see.
  • Credit score between 550 and 650 – you should not have a problem financing a new car if your recent credit history (last six months) is clean. A modest down payment may be required to show the lending institution you are serious about your car purchase. You will probably need to give the dealer a down payment of around 5% to 20% of the car purchase.
  • Between 650 and 700 – You will have no problem getting financed (assuming you have no delinquent marks in the past six months). You can most likely get a new car with a modest $500 down for almost any car.
  • People with credit scores above 700 will have no problem getting a new car, and may even qualify for 0% financing with little or nothing down. It really depends on the dealer and financing company they use. Not all dealers or financing companies offer 0% financing. Call around. The ball is in your court.

Interest Rate

Your credit score does not directly affect the final car price. However, the lower credit score you possess, the higher the interest rate (APR: Annual Percentage Rate) will be.  Below is a table giving you a ballpark figure the APR you can expect and what it means in monthly payment for a 36 month auto loan on $25,000 borrowed. You can also lower your monthly payment by extending the loan to 48, 60 or 72 months.

FICO scoreAPRMonthly Car Payment


  • Invoice Price – the price the local dealer paid for a car.
  • Down Payment – the total amount of money required, usually in cash, at the closing of the vehicle sale.
  • Credit Score – Your FICO credit score is what most dealers will use to determine your credit worthiness.
  • APR – Annual Percentage Rate; is a rate that indicates the total cost of borrowing on a yearly basis. Higher number are worse.

Q: When is the Best Time to Buy a Car?

FACT: There is no single best time to buy a car that works for every car buyer.

Bottom Line: There are certain periods where you have a better chance at getting a good deal. However, there is no golden rule for every single car buyer. In addition, there are also pitfalls to buying during certain time periods.

Here’s why:

END OF MONTH DEALER CLEARNCE: Rumor has it that you should wait until the end of the month. The reason is that car dealers/salesmen need to make sales goals. They cut prices at the end of the month to meet those sales goals.

The truth is many people believe this is true. Therefore, more people run to the dealership at this time. Since there are more people at this time, the demand for cars increase. When demand is higher than supply, you get higher prices. Waiting until the end of the month may not yield the best price, but may increase prices. Studies on car buying during the end of the month show there is no significant difference.

OVERSTOCK: Rumor has it that you should wait just before the new models arrive. The reason is that car dealers need to make make room new arrivals. In order to make room, they cut prices for new arrivals.

This is a half truth. Car prices are set by supply and demand. If the projected demand is high enough, the dealer will not discount prices even if they have hundreds of a specific car model on the lot. This is because car dealers know they are going to sell these cars regardless of the current inventory status. Overstock sales are typically reserved for Labor Day, right before next year models arrive.

LABOR DAY DEALS: Many people say Labor Day is the single best day to purchase a new car. The reason is that car dealers know people have a free day to spend at the car dealership. Also, Labor Day is just before next the arrival of next year’s car models. So, dealers want to unload their surplus inventory.

This is a half truth. For the majority of cars, dealers offer better incentives during Labor Day.

However, you should remember that cars purchased during Labor Day are essentially a year old. This means your car has already depreciated a year before you drive it off the lot. New cars purchased around Labor Day — will lose more value the second you drive it off the lot — than if you purchased the car the week the model came out. This is because the value of the car depreciates faster than the average car dealer lowers prices. (Taking the hit on a year-long depreciation cost surpasses even the most generous Labor Day deal).

If you plan on keeping your car for more than six or more years, you should buy during Labor Day. Otherwise, it makes sense to buy when the new model first appears in the showrooms.

DECEMBER DEALS: Some people say December is the best time to buy a car because dealers want to unload inventory to avoid taxes carried over to the new year. This is false. In fact, car purchasing data suggests the average car price is $400.00 more during December than September. Do not buy a car in December because you think you will get the best deal.