Buying a car with no down payment may sound appealing, especially if you’re eager to get behind the wheel without saving for months. Though it’s possible to purchase a vehicle with no upfront cost, it can affect your finances in the short and long term.

Before heading to the dealership, here’s what you need to know about securing a no down payment car:

How no down payment auto financing works

When you buy a car with no down payment, you’re financing the entire purchase price, including taxes, registration fees, and any additional costs. As a result, you’re borrowing more money, leading to higher monthly payments and potentially higher interest rates.

Your eligibility for a zero-down car loan depends on several factors:

• Credit score: Lenders are more likely to approve no down payment loans when borrowers have higher credit scores.
• Income and debt-to-income ratio: Lenders evaluate your ability to repay by assessing your income and debts.
• Vehicle choice: Opting for a less expensive or pre-owned car can increase your chances of qualifying for no down payment financing.

The pros and cons of buying a car with no down payment

The benefits

• Immediate access to a vehicle: A no down payment car is ideal if you urgently need a vehicle for work or family obligations.
• You can preserve cash for other expenses: Without making a large upfront payment, you can keep funds available for bills, emergencies, etc.
• An opportunity to build credit: Making consistent, on-time payments can help improve your credit score.

The drawbacks

• Higher monthly payments: Financing the entire vehicle cost means larger monthly payments, which could strain your budget.
• Increased interest costs: Lenders often charge higher interest rates for no down payment financing, so you’ll potentially pay more.
• Risk of negative equity: Because cars depreciate quickly, you’re more likely to owe more than the car is worth. This situation is known as being “upside down.”
• Less favorable terms: Lenders may require shorter repayment periods or offer higher rates for zero-down financing to minimize their risk.

Are you curious about what a no down payment car could cost you monthly? You can get a sense of it using Credit Acceptance’s monthly car payment calculator.

Tips for getting approved for no down payment auto financing

If you’re considering of buying a car without making a down payment, here’s what you can do to increase your chances of approval:

• Improve your credit score: A higher credit score can lead to better interest rates and more favorable repayment terms. Try to pay down debts and make timely payments before applying.
• Shop for the best deal: Compare offers to find the most competitive rates. Some dealers run promotions offering zero-down deals on specific models.
• Consider a cosigner: If your credit isn't ideal, adding a cosigner with good credit can help you qualify.
• Negotiate the financing terms: Even without the leverage of a down payment, you should attempt to negotiate the interest rate and repayment terms. You may not secure better conditions, but it never hurts to ask.

Is a no down payment car right for you?

While buying a car with no down payment can be convenient, you’ll want to consider the increased financial burden. This option might work for you if you can manage the higher monthly payments and potentially higher interest rates. However, even a small down payment would be beneficial if you could make one. Use our car pricing calculator to see how it may impact your budget and once you’re ready, pre-qualify online for auto financing.