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If you’re in need of a new car, it’s hard to know exactly where to start. First, you need to calculate how much cash you’ll need upfront and what that sum means for your loan and payments long term. Like any large purchase, you need to know what’s within your budget. You don’t want to jump head first into an expense or car loan that you can’t afford later down the line.

The general rule of thumb has always been to pay 20%, but that advice often overshadows the many other considerations and costs you have to keep in mind for your down payment. Here are 3 questions to ask yourself before you decide just how much to pay for your car down payment.

What’s Your Credit Score?

Unless you’ve saved up enough money to cover the entire cost of the car in cash, you’re going to have to look for financing options to buy your car. It’s always a good idea to check your credit report once a year, but when you’re gearing up to buy a new car, it’s especially important to be aware of your FICO score. Your score helps determine your financing options and interest rates.

Don’t assume that your credit score is in excellent standing just because you’ve been paying your monthly payments on your credit cards. There are numerous factors that go into determining your score, and your credit report will show you exactly which items or actions are holding you back from improving your credit.

Better credit means better options for your car loan. If your score is relatively high, you’ll qualify for the best car loan rates. Let’s say that you’ve saved up 50% of the car cost for your down payment, but you qualify for an extremely low interest rate with only a 20% down payment. It might make more sense to just put 20% down rather than 50% and save the extra cash for your emergency fund.

On the flipside, if you have an extremely low credit score, you might want to consider waiting to save up for a larger down payment so that you won’t be borrowing as much money since you’ll have fewer options for financing that will probably all offer high interest rates.

Don’t go to the dealership without knowledge of where you financially stand to qualify for a car loan. You can request a free credit report from, and also check your credit card company, since many now inform cardholders of their FICO scores on monthly statements.

Which Car Do You Want To Buy?

To determine the actual dollar amount you’ll need, you need to decide on which car you want to purchase. Will you be buying a new car or a used car?

You don’t want to owe more money on your car than it’s worth, and since new cars depreciate in value at an average rate of 15 to 20% per year (TrueCar data estimates that new cars depreciate 36% over five years.), you want to have at least 20% for new cars. For old cars, the value doesn’t depreciate as much, so the recommended percentage is 10% for a down payment on a used car.

It’s tempting to use all the money you saved to make a payment on the most expensive and luxurious car at the dealership. After all, if you can pay 20% of the price tag, that means you can afford it, right? Not always. You are essentially taking out a loan for the rest of the cost of the car, so if you’re using all the money you have in the bank for that 20% down payment on the expensive car, you’ll probably be broke or unable to pay up when that monthly loan bill is due. If you used your money for a larger payment on a less expensive car, you’d have a smaller loan and smaller monthly payments. In some cases, if your credit score is high, you might be able to reason that the luxury car is within your reach if you qualify for a low interest rate and you know that you can pay the monthly payments.

What Are Your Loan Offers?

All the percentages and factors don’t make sense until you actually start to crunch the numbers. Before you go to the dealership, check with your bank or a credit union to inquire about their car loan terms. Lay out all your options for different loan terms and interest rates.

When you finally make it to the dealership, you’ll be more informed of what your options for financing are, and whether the dealership is offering a fair deal. Experts recommend that car loan interest rates should stay below 7%, so if neither the bank or dealership offers a rate at 7% or lower, you might want to consider waiting a while to save up for a larger down payment.

Having a larger down payment does give you some ability to negotiate with the dealership on the purchase price, but don’t let them dissuade you from considering how a larger down payment may or may not affect your loan terms. As mentioned earlier, just because you saved up 50% for a payment, doesn’t mean you have to use it all. If you qualify for a competitive loan with just 20% down, you might want to consider just putting 20% down and using your saved cash for something else.

There’s no one-size-fits-all rule, and the rule of thumb figure of 20% is only a starting point. Anyone trying to sell you a car is going to want you to buy regardless if it hurts your finances, so check your credit score, decide which car you want, and explore your loan options before you head to the dealership to make a purchase.