How much should you put down on a car?

The conventional targets are 20 percent down on a new car and around 10 percent on a used one, and the reasoning is depreciation rather than tradition. New vehicles lose a substantial share of value immediately and continue steeply through the first few years, so a loan with little money down leaves you underwater almost instantly, owing more than the car would sell for. That matters concretely if the car is totaled or stolen, since insurance pays the vehicle's value rather than your loan balance, leaving you writing a check for a car you no longer have unless you carry gap coverage.

Loan length is the variable that has quietly done more damage than down payment size. Terms of 72 and 84 months have become common because they make monthly payments look manageable, but they extend the underwater period for years and pile on interest, and the useful discipline is that if you need seven years to afford it, you are buying too much car. A workable frame is a payment under about 10 to 15 percent of take-home pay on a term of 60 months or less. Two more things worth doing: arrange financing through a bank or credit union before visiting the dealer so you have a rate to beat, and negotiate the out-the-door price of the vehicle rather than the monthly payment, since payment-focused negotiation is how term length and add-ons get quietly inflated.