Online calculator to help you decide on a house or car within your budget
These simple tips will help you figure out your budget if you’re looking to buy a home or car.
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- The average down payment for a new car fell to its lowest level in years in the third quarter.
- One expert says higher interest rates and longer loan terms for new cars indicate that consumers are being selective about how they spend their money.
- A better trade-in deal can make up for a lower down payment.
Down payments on new cars have fallen to the lowest level in nearly four years in the past few months.
That’s according to new analysis from car shopping site Edmunds.com.
The average down payment in the third quarter was $6,020. That compares to $6,433 in the second quarter of 2025 and $6,619 in the third quarter of last year, Edmunds said.
Ivan Drury, director of insights at Edmunds, said the change will be notable, as the third quarter of this year was down $413 compared to the second quarter and down $599 compared to the same period last year.
Mr. Drury said he would need to see more data in the coming quarters to assess its significance, but said the decline in average down payments was noteworthy, along with other factors.
“It’s definitely some kind of national flag. I wouldn’t call it red. I would call it yellow,” he said.
Consumers aren’t necessarily getting a lower down payment just because they get a special financing deal. Drury said they appear to be making choices based on economic realities, as the cost of living has risen (inflation rose to 2.9% through August) and vehicle prices remain high (average transaction price in August reached $49,077, up from $48,841 in July, according to Kelley Blue Book).
Drury said the combination of high interest rates on new car purchases (averaging 7% in the third quarter) and long loan terms (22% of financed purchases in the quarter were over seven years) means consumers are being selective about how they spend their money. Edmunds noted that the Fed’s recent rate cuts came too late to have a significant impact on interest rates this quarter.
Increasing your down payment when taking out a car loan will reduce the amount of interest you pay, which is definitely a plus, but increasing your down payment won’t necessarily lower your monthly payments significantly. According to the Edmunds calculator, adding $5,000 to a down payment of various amounts for 72 months at a 7% interest rate will save you about $85 per month. While that’s a monthly benefit, it may not be enough to offset the challenge of coming up with additional funds on the front end.
But Drury said consumers still have options.
“Given that most people are already set on the car they want to buy and aren’t willing to change make or model just for an incentive deal to lower their APR, the next best thing is to buy a trade-in and see if you can get the most value for it. The trade-in value can vary quite a bit, and can easily make up the difference between your down payment from a few months ago and now.”
Eric D. Lawrence is senior auto culture reporter for the Detroit Free Press. If you have any tips or suggestions, please contact us at elawrence@freepress.com. Become a subscriber. Submit a letter to the editor at freep.com/letters.
