My credit rating is poor but I'm looking at a car that is around 27,000. If I have a large down payment (40%) to put towards the purchase of the car would I still get approved for a loan for the remaining $16,200? Does the down payment affect what interest rate I'm able to get or does it no make a difference since my credit is less than perfect? Do the banks consider larger down payments a positive thing? Any insight would be greatly appreciated.


2 Answers 2


This is all dependent on the lender. However, generally, lenders are willing to offer you a better interest rate if you have a larger down payment. This is because the down payment is instant cash for the bank and they have to lend out a lower amount - thus taking on a lower risk. You will have to contact your specific bank to find out the details.

Here's an excerpt from an article I found through Google:

Aside from having an excellent credit history, a substantial down payment can positively affect your auto loan rate. If you are willing to make a decent down payment on a new vehicle, the lender may be able to qualify you for the best interest rate offerings they have. Because the down payment represents instant cash in the pockets of lenders, they will be more flexible when it comes to payments and rates.

  • This doesn’t make sense. When you buy a car, you pay the seller. Lenders don’t get the down payment; the seller does, and you borrow money for the rest of the purchase price. Commented Sep 22, 2017 at 12:19
  • Have I been misinformed? Everywhere on the internet and common sense says the down payment shortens the amount needed to borrow. If that is indeed true, why would the down payment go the the dealer/seller?
    – c1766
    Commented Sep 22, 2017 at 21:05

The down payment probably won't affect interest rate as much as it does mortgages since the time frames are shorter, there's less spread in short-term rates, and cars are MUCH easier to repossess than houses (less risk). It might affect the eligibility, especially if you're buying the car at or above market value. A 40% down payment should help that considerably, though.

However, you should put down as much as you can. I wouldn't expect a big difference in interest rate, but the other benefits (paid off sooner, lower payment) definitely make it wise to put more down upfront,

  • The reason I want to stay within 40% is to borrow less than needed versus if I put down 10%. So, from what I'm understanding is that in terms of down payment all that pretty much affects is how much to borrow from the bank?
    – c1766
    Commented Sep 21, 2017 at 20:33
  • What do you mean by eligibility?
    – c1766
    Commented Sep 21, 2017 at 20:35
  • @c1766 ability to get approval for financing. They may not approve you for 5% down but might at 40% (since they have less risk of getting their money back in a repossession).
    – D Stanley
    Commented Sep 21, 2017 at 21:01
  • @c1766 Don't get me wrong - you should put as much down as possible, but I would not expect a massive difference in interest rate.
    – D Stanley
    Commented Sep 21, 2017 at 21:02

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