Though not every applicant will need a down payment to get a car loan, the truth is that if you have a poor credit history you will most likely need to have a down payment in the form of cash or actual trade equity.

Down payments are necessary for auto loans of 72 months and longer because in many cases the vehicle being bought is not worth the total amount owed once it is driven off the lot. So for at least a few months, the borrower is driving about in a vehicle that is in fact underwater.

The requiring of a down payment is not however a negative for the borrower. Down payments can in fact help the borrower by lowering the monthly payment and reducing the term of the loan. Both of these benefits lower the total amount a borrower ends up paying in interest.