Here's How to Get a Car With No Down Payment

If you need to buy a car, but you lack the cash or the required down payment, you can typically finance the whole purchase. However interest rates will be significantly higher. However there are ways to get a car with no money down while getting lower rates, such as by getting co-signer, increasing your credit score, and negotiating the terms.

Boost Your Credit Score

Lenders lower interest rates for borrowers who have steady jobs or regular monthly income, who have lived in one place for at least a year, and who have good credit history.

Credit scores of 680 and higher give you the best chances of getting your a car with no down payment without higher interest rates. Scores between 580 and 669 are considered subprime. If you have a subprime score, you may be able to get a car with no down payment, but you will likely have a higher interest rate on the car loan. If you have a score below 580, you may not get approved for a card loan.

You can improve your credit report in several ways, including by first checking its accuracy. Then, pay all your bills on time, and try to pay off debts and credit card balances. Aim to keep your credit utilization rate, or the amount of your available credit that you use, around 25% to 30%.

Consider a Cosigner

Another option may be to get a family member or friend with a strong credit score to cosign the loan. If you have poor credit, having a cosigner can help you get a car with no down payment and with potentially lower interest rates.

Using a cosigner to get a car loan does have downsides to consider. If you are delinquent or default on your payments, both your credit score and your cosigner's credit score will likely decline. Depending on a cosigner can complicate your relationship with them if it leads to conflicts. For example, they could feel they've a right to the vehicle or they may start to resent you if you fail to pay the loan. If you do get a cosigner, keep organized records to minimize disagreements.

Shop Around

Car loans can vary a lot. So do your homework, and shop around. Consider auto dealerships, local credit unions, banks, or alternative loan providers. Research current auto loan rates online, and look for specialized online lenders that offer low-rate auto loans without down payment requirements.

Familiarize yourself with the most common auto loan rates to avoid being duped or misled by dealers. Knowing the going rates and what offer you can qualify for will help you negotiate better terms.

Save Up for a Down Payment

While you can get a car with no down payment, it is in your best interest to try to put some money down if you can. Not making a down payment can leave you "underwater" on your loan because the value of cars depreciate quickly. You can typically make a down payment for under 20%. In fact, car buyers in 2019 made an average 11.7% in down payments, due to the increasing costs of vehicles.

The more money you put down on a loan, the greater your chances of getting lower interest rates, which can save you substantially in the long-run.

If you can, delay car buying until you can save up for the down payment. Meanwhile, you can also use that time to boost your credit score, so that you'll better qualify for more favorable loan terms.

The Bottom Line

You can buy a car with no down payment, but you are more likely to pay much higher interest rates. Another option is to buy a cheaper used vehicle or trade in your existing car, if you have a vehicle that's in good condition, which can help lower your rate, too.

To better understand what the costs of purchasing a car with no down payment, use a auto loan calculator to estimate monthly costs and interest expenses for various loan terms.