Most loans financed to purchase vehicles require a down payment. What is a down payment? A down payment is a specific amount of money paid up front as a condition of receiving financed funding. A down payment is essentially a financial statement to the lender, which indicates you are serious about obtaining and affording a car loan. 

A down payment shows you are capable of saving money over an extended period and/or your income is high enough to afford a loan. The lowest auto loan rates are offered based on a combination of your FICO score, your income/employment history and the amount of your down payment.

Pay a Larger Down Payment

How does using a larger down payment help get the best auto loan rate available today?

A larger down payment reduces the principal amount owed on your car loan. A lower principal balance affects APRs in a specific (and beneficial) way for borrowers. All loans have terms. A loan term is the length of the loan, or essentially how long it takes you to pay it off in full. 

Longer loan terms commonly result in lower/more affordable monthly payments. In exchange for this benefit lenders charge higher APRs.

Therefore, using a larger down payment helps reduce the length of your loan, which also frequently gets you lower rates.

Lenders with pricing flexibility might also reduce the APR on your new car loan as a courtesy because you paid more money up front. The best used car loan rates are often offered to borrowers making a larger down payment as well. Saving money for a larger down payment might be a challenge but is worth it in the end. 

Some lenders offer promotional loans with zero down payment financing. Even in these situations it is beneficial for you to make a larger down payment and save money through resulting lower interest rates.