How much should you put down on a used car?
A bigger down payment lowers the payment, cuts interest and keeps you from owing more than the car is worth. Here's the same $25,000 Houston car with $0, 10% and 20% down, and how to pick your number.
By the LotGauge team
The short answer
A common rule of thumb for a used car is 10% to 20% of the price, and at least enough to cover the taxes and fees. Below that, you start the loan owing more than the car's price, because the tax, title and dealer fees are financed too. Above 20%, each extra dollar still saves interest, but it's worth keeping an emergency fund first.
Worked example: a $25,000 car in Houston
Texas charges 6.25% motor vehicle tax ($1,562.50 here). Add $35.50 for Harris County's title fee and registration transfer and a $225 doc fee, and the out-the-door price is $26,823. Here's the same car financed for 72 months at 8.81% APR with three different down payments:
$0 down: you finance $26,823. The payment is $480.97 a month and you pay $7,807 in interest. Open in the calculator.
10% down ($2,500): you finance $24,323. The payment is $436.15 and interest is $7,079. Open in the calculator.
20% down ($5,000): you finance $21,823. The payment is $391.32 and interest is $6,352. Open in the calculator.
Going from $0 to 20% down lowers the payment by about $90 a month and saves about $1,455 in interest. Put the same $5,000 down on a 60-month loan instead, and the payment is $451.00 with $5,237 in interest, about $2,570 less interest than $0 down over 72 months. See the 60-month version.
Why $0 down can leave you owing more than the car is worth
With nothing down, the loan in the Houston example starts at $26,823 on a $25,000 car: $1,823 more than the price, because the tax and fees were added to it. After one year you'd still owe about $23,273; after two years, about $19,398. Used cars keep losing value while you pay, so a small or zero down payment raises the chance that you owe more than the car would sell for, especially on a long loan.
That matters if the car is totaled, stolen or traded in early. Your insurer pays what the car is worth, not what you owe, and a trade-in with a loan larger than its value adds the difference to your next loan. See how trade-in equity changes your payment and when GAP coverage is worth it.
Your trade-in counts as a down payment
If your trade-in is worth more than you owe on it, that equity works like cash down. In most states it also lowers the sales tax, because tax is charged on the price minus the trade-in. In Texas, a $5,000 trade-in saves about $313 in tax on top of its $5,000 value. See the trade-in tax credit by state.
How to choose your number
1. Cover at least the taxes and fees, so the loan doesn't start above the car's price. 2. Aim for 10% to 20% if you can do it without emptying your emergency savings. 3. Compare the payment at 60 and 72 months; a bigger down payment on a shorter loan saves the most interest. 4. If you have a high-interest credit card balance, paying that down may save more than a larger down payment.
Try your own numbers in the car payment calculator. Its term comparison shows the balance you'd still owe after 3 years at each loan length, and it warns when the loan is larger than the car's price.
Sources
Texas Comptroller, Motor Vehicle Sales and Use Tax. Harris County Tax Office, Buying a Used Motor Vehicle. Texas Office of Consumer Credit Commissioner, documentary fee rule (2024). Experian, average used-car loan rates by credit score (Q2 2026). Checked October 2026. Payments and balances were calculated with LotGauge's calculator and are examples, not offers.