How much deposit do I need for a car loan?

Calculate how much deposit to put down for a car loan

Deposits for car loans are not a mandatory element to getting a car loan. However, it can help with the approval process and will ultimately lower the amount on your repayments and overall interests if you can pay part of your car off upfront. Some lenders will insist on a deposit of 10-20%, while others will allow you to take out a loan on the entire value of the car.

How do car loan deposits work?

Car loan requirements are based on a lender's maximum loan-to-value ratio (LVR), which represents the maximum percentage of the car's value available for you to borrow. This amount is part of the lender's decision about the percent of LVR.

Some lenders will lend you 100% of the car's value, while others will offer to fund 140% of the value. In this case, you usually don't have to pay a deposit.

Almost 60% of Australians take a loan when they buy a car, and most look to put down a deposit and in doing so avoid high repayments on the life of their loan.

What are the benefits of a car loan deposit?

Don’t think of a car loan as an object but rather a loan amount, it’s simple maths, the less you have to repay, the less interest you are repaying to the lender over the life of the loan. 

There are, however,  further benefits to putting down an initial deposit on a car loan than just how much you need to repay. All lenders are risk averse so the greater the deposit the customer provides starts to balance the scales for the amount of risk taken on by both parties. 

Consumers are rewarded for placing down an initial car loan deposit with the following benefits:

  • A lower interest rate, saving you money over the life of the loan.
  • Higher chance of approval, especially if you have a bad credit score.
  • Greater purchasing power, your choice of lenders may increase and they may offer you better rates to get your business.

How much deposit do I need for a car loan?

The amount you choose to deposit initially on your car loan should be how much you can afford as your number one factor. Although car loan brokers will recommend a 10% initial down payment you need to consider the amount you will be paying on on-road costs such as registration and insurance as well as any hidden costs of the vehicle, eg. UV tinting on windows. 

What if I don’t have a car loan deposit?

Not all lenders require a deposit on a car loan. If you are looking for the best loan for your current circumstances CarClarity can help you get the best deal tailored to you. Contact us now!

Zaheer Jappie

Zaheer is the Founder and CEO of CarClarity, Australia’s first true car loan platform with an easy online application process. Zaheer has over 14 years of experience in senior management and executive positions within the financial space. He founded CarClarity in 2019 to address the unfair gap and lack of transparency he observed in the car financing market, where traditional lenders were commonly placing profit margins over customer outcomes. Zaheer is also an avid car enthusiast who has owned 10 cars in as many years. His passion for cars combined with his industry knowledge provides a unique insight into the car buying and financing space.

min read

Car loan refinancing can save you money, so long as you’re smart about it

Car loan refinancing is one of the most commonly overlooked areas when it comes to household budgeting, but refinancing your car loan can save thousands and free up cashflow significantly.
Posted on
May 18, 2021
min read

How to get instant asset write-off for your car

Don't miss the opportunity to take advantage of one of the best tax breaks available for businesses this financial year! Read our complete guide on how to claim instant asset write-off on your vehicle.
min read

How do car loans work? A complete beginner's guide

So you've found the perfect car and you can't wait to take it home – all that stands in the way is financing.But with a sea of car loan options out there, what are the important things should you be looking for, and how do they actually work?
Posted on
May 13, 2020
min read

The benefits of refinancing a car loan

A greater number of savvy Australians are looking to hack their current short term and long term expenses and boost their savings through car loan refinancing. Find out how you can take advantage here.
Helpful car loan expert on computer

Get free expert advice on financing your next vehicle

Our experts will help you figure out the cheapest new car loans available for your financial situation.