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You’re driving through an intersection when you get T-boned by another car. You’re fine, but your car is totaled. Since you’re still paying off this car, you may wonder: What happens to that loan? Will your car insurance cover the balance?

The answer is, it depends.

Your car insurance will only cover the current value of the car. If the balance on your car loan is larger than that, you will have to cover the difference out of pocket. That is, unless you’ve purchased a GAP waiver agreement when you financed the car. If you did, the full amount of the loan will be covered by this policy. Below we highlight what a GAP waiver is and what it covers.

What Is a GAP Waiver?

GAP (Guaranteed Asset Protection) insurance is an optional add-on to your car loan contract that waives your obligation to pay the remaining balance on your auto loan in the event your car is totaled or stolen before you’re finished paying it off. GAP waivers are available for both new and used cars.

You can buy a GAP waiver when financing or refinancing a car, and the coverage can be paid in one lump sum or rolled into your auto loan. Once purchased, GAP will provide coverage for as long as your loan remains in place, provided you adhere to the terms of your loan contract.

Without a GAP waiver, insurance will only cover the car’s actual cash value (ACV), also known as its book value, in the event the car is totaled or stolen. You would then need to make up the difference between that amount and the loan balance.

Recommended: Smarter Ways to Get a Car Loan

What Is Loan-to-value (LTV)?

A loan-to-value (LTV) ratio is the total value of your loan divided by the ACV of your car. You can use this formula to figure out the LTV ratio, expressed as a percentage:

Loan amount / car value x 100 = LTV

If you’re borrowing $30,000 to finance a car valued at $35,000, the LTV would be about 86%. If after a few years, you still have $20,000 left to pay on your loan and the car’s value dropped to $15,000, your LTV would be 133%, which means you owe more than the car is worth.

In this scenario, if your car got totaled or stolen, you would have to cover the gap between your loan balance ($20,000) and the car’s value ($15,000), or $5,000. If you had a GAP waiver, on the other hand, insurance would pay it.

What Does GAP Cover?

Regardless of whether your car is damaged to the point that it is unusable or was stolen, a GAP waiver will cover the remaining balance on your car loan that your auto insurance policy won’t pay for. In some cases, GAP waivers will also cover the cost of your insurance deductible, up to a limit as defined by your contract.

What Does GAP Not Cover

GAP typically only kicks in when your car is damaged beyond repair or has been stolen, and it only covers what you owe on the car. This means GAP won’t cover other people or their property. It also means it won’t foot medical bills or legal costs related to an accident.

Other costs GAP typically doesn’t cover include:

•  Loan balances over a specified LTV (such as over 150%)

•  Refundable additions made to your loan or lease contract, such as a vehicle service contract

•  Loan interest accrued after the date you lost your car

•  Past due loan payments

•  Late charges and other fees

•  Cost of renting a car

7 Times When a GAP Waiver Is Helpful

GAP waivers are typically not required when financing the purchase of a car (leasing companies may require them), but here are seven scenarios where it may be worthwhile to purchase optional GAP waiver coverage:

1. Upside-Down Auto Loans

If you have an upside-down auto loan, which means the amount you owe is more than the cash value of your car, then it may be a good idea to add a GAP waiver. If you were to total a car with an upside-down loan (or it got stolen), you would end up owing more to the lender than the insurance would pay out (which would max out at the car’s current value).

2. Small Down Payment

Your down payment size matters when financing the purchase of a new or used car. The more money you put down on a car, the lower your LTV ratio, and the lower the chance you’ll ever owe more than your car is worth. If you put down less than 20% on a new car purchase, however, it might be worth getting a GAP waiver. Depreciation starts as soon as you drive the car off the lot, and having a high loan balance exposes you to out-of-pocket costs in the event your car is stolen or totaled.

3. High Mileage Vehicle

If you put a lot of miles on your car, it will depreciate faster. That means if your car became unusable at some point, its value could be lower than the amount you owe on the loan. This could expose you to costs in the event that it gets totaled or stolen.

4. Luxury Cars

Luxury cars often depreciate faster than non-luxury cars. Before financing your car, and before making a decision about a GAP waiver, you might want to research the make and model of the car and how quickly you can expect it to depreciate. If the value will decline quickly, a GAP agreement could be a good thing to have in your back pocket.

Recommended: Luxury Car Maintenance Costs

5. High Interest Rate

When you take out a car loan, you typically pay more toward interest in the beginning of your loan amortization schedule. Having a higher-than-average car loan interest rate can affect how quickly you build equity over time. If the car gets totaled or stolen before you’ve had a chance to build much equity, you would likely owe more on the loan than the value of the car.

6. Long-Term Auto Loans

A long-term car loan creates a problem similar to having a high interest loan. The longer the loan term, the longer it will take you to build up equity. This leaves you vulnerable to a period of time during which your loan balance may be higher than the value of the car.

7. Leased Vehicles

Some creditors require you to obtain GAP coverage when you lease a car. A GAP waiver (or something similar called loan/lease coverage) may be part of the agreement when you lease a vehicle. Should your car get totaled or stolen, and you need to terminate your lease early, it will cover the “gap” between the early termination payoff and the value of the car.

Recommended: What Are Car Loan Charge Offs?

GAP Waiver vs GAP Insurance

A GAP waiver and GAP insurance offer the same type of coverage. The only difference is where and when the policy is purchased.

A GAP waiver is an add-on that’s offered by your lender or finance company when you take out a loan on the car or when you refinance it. GAP insurance, on the other hand, is an outside product that’s available through a licensed insurance agent or broker and can be purchased at any time, even if you’re using a loan to buy a car from a private seller.

Driving with GAP coverage typically isn’t necessary when financing a car purchase, but it can provide some peace of mind. If your car gets totaled or stolen, you won’t get hit with having to pay off a major part of your loan.

Your existing auto insurance policy typically only covers the cash value of your car. Because of depreciation, there’s a chance that your coverage won’t be enough to pay for the full amount of the loan, particularly during the early months or years of your loan, when you haven’t built up much equity in your car.

Buying a GAP Waiver Agreement

A GAP waiver is typically offered as an additional option to your loan when you are buying or refinancing a car. You generally have the option of paying for it upfront in one lump sum or having it folded into the loan. You’ll sign the waiver at the same time as you sign the rest of your loan documents.

When you purchase a GAP waiver, you may receive a GAP waiver agreement that spells out all the terms and conditions of the coverage, including the GAP refund policy if one exists.

Recommended: How Car Loan Refinancing Works

Adding GAP Coverage to an Existing Loan

In general, a GAP waiver may only be purchased at the time you are taking out a new loan or refinancing an existing loan; you can’t add it on later. You can, however, purchase GAP insurance from a third-party company at a later date, as long as the loan has not been fully paid off.

The Average Cost of a GAP Waiver

If you purchase a GAP waiver from a lender or financing company at the time of financing or refinancing, the average cost is typically $500 to $700. While it may be hard to come up with that full amount all at once, if you fold this cost into your loan amount, you may pay interest on the cost of the waiver. Purchasing GAP insurance separately from a third-party insurance company tends to cost less. You may be able to get GAP insurance for $20 to $40 per year if you bundle it into your existing auto insurance policy.

GAP Refund

Unless GAP was required by your creditor (such as in the case of a lease), you can typically cancel it at any time. And you may be entitled to have all or some of the cost refunded. It all depends on what’s in your contract, how soon you ask for a refund, and how you paid.

You may be able to get a full refund if you cancel within a certain period of time (such as 30 or 60 days). If it’s later than that, and you paid in full upfront, you may be able to receive a prorated amount back. If you rolled the cost of the waiver into your loan amount, it will likely be harder to get a refund.

What Happens to a GAP Waiver During the Refinancing Process?

Because the GAP waiver is tied to your original loan, it won’t carry over to your new loan when you refinance your car. However, you may be able to get a refund of some of the cost of the waiver. In addition, you can purchase a GAP waiver for your new loan through your new lender.

There are pros and cons of auto loan refinancing. You may pay more interest over the life of the loan if you refinance with an extended term. Refinancing for a lower interest rate without extending your term can lower your total borrowing costs over the life of your loan.

Recommended: Comparing Titles Loans vs Auto Loans

The Takeaway

GAP coverage can make sense in any situation where your loan balance is likely to be larger than your car’s actual cash value, such as when you’re starting out upside-down on a car loan, you have a high interest rate, you put little down on the car, or you put a lot of miles on your car.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What does a GAP waiver cost?

If you’re buying a GAP (Guaranteed Asset Protection) waiver directly from the dealership or lender, the average cost is typically $500 to $700 as a one-time fee. Adding it to your existing car insurance policy can run anywhere from $20 to $40 a year.

Why is it called a GAP waiver?

GAP waiver stands for Guaranteed Asset Protection waiver. It is an optional, add-on coverage that can help cover the “gap” between the financed amount owed on your car and your car’s actual cash value, in the event where the car is declared a total loss.

What happens to a GAP waiver when you refinance an auto loan?

When you refinance your vehicle, your GAP waiver doesn’t roll over to your new loan. You might be able to get a prorated refund, and you can purchase a new GAP waiver for your new loan.

What is the difference between GAP insurance and a GAP waiver?

A GAP waiver is an add-on that’s offered by your lender or finance company when you take out a car loan or when you refinance it. GAP insurance, on the other hand, is an outside product that’s available through a licensed insurance agent or broker and can be purchased at any time, even if you’re using a loan to buy a car from a private seller.

What is a GAP waiver refund?

A GAP waiver refund is a return of some or all of your paid GAP coverage costs. If you’ve purchased GAP waiver coverage and then canceled GAP within 30 days, you might be entitled to a full refund. In other cases, you may be entitled to a prorated refund if you cancel your GAP coverage.

Photo credit: iStock/PixelVista

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-068

If you’re looking to refinance your auto loan (and potentially lower your rates and/or payments), you will likely need to present proof of car insurance as part of the application process. What exactly is proof of insurance? It’s a card or letter that states you have current and valid auto insurance up to the state minimum.

Before you start going down the road to refinance, here’s everything you need to know about proof of insurance — what it is, how to get it, and why you need it.

What Is Proof of Insurance?

Proof of insurance is an important document issued by your insurer that states you have an active car insurance policy. The information included can vary, but proof of insurance typically contains:

•  The policyholder’s name and address

•  Insurance company’s name, address, and phone number

•  Effective date and expiration of the policy

•  Policy number

•  The year, make, and model of the car

•  The vehicle information number (VIN)

•  Coverage amounts

Your car insurance card may also show confirmation that your policy meets your state’s minimum requirements.

💡 Recommended: Average Cost of Car Insurance in Texas

What Is a SR-22 Certificate?

An SR-22 certificate is a form that is filed with your state to show that you are meeting your state’s minimum auto liability insurance requirements. Not everyone needs an SR-22. Laws vary by state, but in general, drivers may need to have their insurance company file an SR-22 form with the state department under the following circumstances:

•  Conviction for driving under the influence

•  Serious and/or repeat traffic offenses

•  An at-fault accident with no insurance

What Counts as Proof of Car Insurance?

The document used as proof of insurance might be a physical ID card, a PDF of the ID card you can print, or a digital card accessed through a mobile app. Law enforcement in every state except New Mexico will accept proof of insurance on a mobile app. You may also be able to use a proof of coverage letter from your insurance company that has details about your policy as proof of insurance.

Why Do I Need Proof of Insurance?

There are several situations in which you need to show proof of insurance, including:

•  If you are pulled over by law enforcement

•  If you are in an accident and need to exchange insurance information

•  If you are registering a newly purchased vehicle or renewing your license plate at the Department of Motor Vehicles (DMV)

You will also likely need to show proof of insurance if you are applying for a new auto insurance policy, whether it’s to finance or refinance a vehicle. Why is this necessary? Lenders generally want to make sure that insurance will protect their investment, since they also own the car until you fully pay off the loan. Otherwise, if the car is damaged or totaled, the lender would have to get the money from you for repairs or to replace it, which is typically much harder than having the insurance company pay for it.

Failure to Show Evidence of Insurance

What happens if you don’t have proof of insurance? The consequences will vary, but assuming you are insured, they are usually relatively mild. If you’re pulled over by the police for a violation and do have coverage, but don’t have your card on you, you will likely be given a certain timeframe to prove that you are covered. If you later show proof of coverage, you might have to pay a small fine or, possibly, no fine. Fines are generally higher if you are not carrying proof of coverage at the time of an accident.

Most states don’t put failure to show proof of insurance on your driving record, but if you are in a state that does, your insurer could slightly raise your rates or remove your safe driver discount. Some insurers will let the first incident slide, but will impose consequences if it happens a second time.

If you actually don’t have car insurance, the consequences get more serious. You may have your car impounded or your license suspended. And, if you get pulled over multiple times without car insurance, you could possibly go to jail. If you are at fault in an accident, you may be responsible for all costs.

Fake Proof of Insurance

You can buy almost anything online, and that includes fake proof of car insurance. Doing so, however, is a very bad idea. Driving without insurance is illegal in most cases and results in a ticket and fine. And, police officers have access to a database that allows them to immediately verify your insurance. Presenting a fake insurance card could constitute insurance fraud and lead to a much steeper penalty.

Do You Need Proof of Insurance to Refinance a Car?

Typically, yes. If you’ve weighed the pros and cons of vehicle refinancing and decided it’s the right fit, you’ll want to make sure you have proof of insurance on the car before you apply for refinancing.

At a minimum, lenders typically want to make sure that your insurance complies with your state’s laws. In many cases, however, they will require that you have “full coverage” on your car to approve you for a refinance. This includes liability insurance, collision insurance, and comprehensive insurance.

You will also need to maintain that coverage for the duration of the financing. Should you drop the required auto insurance coverage, it will be considered a violation of your finance contract and could put your loan in jeopardy. Also, the lender could place single interest coverage (also called force-placed insurance) on the vehicle and add the premium to the loan.

Recommended: How Soon Can You Refinance a Car Loan After Purchase?

How to Get Proof of Insurance for Your Car

There are several ways to get proof of insurance for your car:

•  By regular mail: Your insurance company will typically mail you several copies of your paper insurance card when you start a new policy. If you’ve misplaced your cards, you can call up your insurance company and ask them to mail you some additional cards.

•  Via email: If you need to get your card quickly, you can ask your insurer to email you a copy of your insurance card. You can then print that out and keep it in your wallet or car’s glove compartment.

•  Through an app: Many insurance companies now allow you to access your insurance card through their mobile apps. That means that if you need to show your card but don’t have it handy, you can simply open up the app and display the card on your phone.

Recommended: How Do You Get a Gap Insurance Refund After Refinancing?

What Does an Insurance Card Look Like?

Proof of insurance typically looks like a wallet-sized card with a set of information that includes the name of the insurer, name of the insured, the policy number, and term of policy. It can also be a print-out of an insurance card, or be shown on your phone through an app or website.

Proof of Car Insurance Letter

Proof of car insurance letters from your insurance company also count as proof of insurance. This will contain the same information as the car insurance card, but in letter form. This can typically be used in lieu of an insurance card for an auto loan refinance application.

Recommended: Auto Loan Settlements

Other Documents Needed to Refinance a Car Loan

In addition to your proof of insurance, you will need to supply other information and documents to apply for an auto loan refinance. These often include:

•  Driver’s license

•  Pay stubs from your current employer or proof of employment

•  Your Social Security number

•  Vehicle identification number (VIN)

•  Make, model, and year of car

•  Vehicle registration

•  Current loan information (including the name of your current lender, your loan account number, monthly payment, interest rate, and remaining balance)

Recommended: When Should or Shouldn’t You Refinance a Car Loan?

The Takeaway

Shopping for a better auto loan — and refinancing your current car loan — is typically a simple and straightforward process. However, before you apply for an auto loan refinance, you’ll want to make sure you have proof of car insurance.

Proof of insurance is a paper or electronic card issued by your insurance company stating that your car is currently and adequately insured. If you don’t have one, you can get proof of insurance by contacting your insurance company.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

What is proof of insurance?

Proof of insurance is a document that proves you have a current and valid auto insurance policy and it meets your state’s minimum liability requirements. It will typically include:

•  The insurer’s name and address

•  The policyholder’s name

•  Effective date and expiration date of the policy

•  Policy number

•  The insured vehicle’s year, make, model, and vehicle identification number (VIN)

How do I get proof of insurance?

You can access your proof of insurance document on your insurer’s website, through their app, or by calling customer service and asking them to send you a paper copy via regular mail or a PDF via email.

Why do I need proof of insurance?

Almost all states require car insurance to register and drive a car. You will need to show proof of insurance if you are pulled over by law enforcement, in an accident, registering a new vehicle, and/or applying for auto financing or refinancing.

Photo credit: iStock/Nastasic

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-067

Financing a car is a major financial decision, and many factors will determine your interest rate and what you ultimately spend on the car. One of those factors is the size of your down payment.

Here, learn what a good down payment on a car is, pros and cons of making a down payment, if making no down payment is ever a good idea, and more.

What Is a Good Down Payment on a Car?

So, what is a good amount to put down when you’re taking out a car loan? The typical down payment on a car is often quoted as 20%, but the truth is that not everyone pays that much.

In the second quarter of 2025, the average down payment on new vehicles stood at $6,579, while the average down payment on used vehicles stood at $4,092, according to Edmunds data.

Banks and other lenders financed an average of $40,873 on new vehicles and $28,166 on used vehicles bought in Q2 2024, Experian data show. The average transaction price for new vehicles surpassed $48,900 in June 2025, according to Kelley Blue Book.

These numbers suggest the average U.S. car buyer puts 10% or more down when buying new or used vehicles.

Down Payment on a New Car

A 20% down payment on a new car could be ideal for establishing an equity stake from the get-go. This may prevent your car loan from becoming an upside down auto loan in which your loan balance is greater than your car’s appraised value.

The way car loans work is that lenders provide financing to help borrowers purchase a new or used vehicle. Borrowers are expected to repay the car loan over a set term, and these loans may include interest charges as determined by an annual percentage rate or APR.

Lenders may impose late fees if you fail to make a timely payment on your loan. But lenders may also honor a car payment grace period before such penalties would apply.

Down Payment on a Used Car

A 10% down payment on a used car may be sufficient in preventing your loan from starting off underwater. Borrowers are expected to provide proof of identity and proof of income when applying for auto loan financing, among other auto loan requirements.

Say you buy a used car that costs $30,000, and you have no trade-in. If you made a down payment on a car of 11%, that would be $3,300. You’d still have to take out a loan for $26,700. Over five years, your monthly loan payment might be almost $500 if you have excellent credit (meaning you’d qualify for just over a 9% interest rate).. Consider whether you can afford that amount over the relatively long term of your loan.

This calculation doesn’t factor in car loan interest, which can vary depending on several factors, including your credit history, the length of the loan, and how much you plan to borrow.

The right amount to put down depends largely on your finances and priorities. When you’re determining how much to put down on a car, look at the big picture, since this is a debt you may have for several years. Determining how much down payment for a car to make is truly a personal choice.

Calculating Your Down Payment

Calculating your down payment amount can be done by multiplying the percentage of your desired down payment by the car’s total sale price. The formula could be expressed as follows:

(Percentage Down) x (Total Sale Price) = Down Payment Amount

For example, you may calculate a 10% down payment by using the decimal form of 10% and multiplying that number by the total sale price of the vehicle. If the vehicle costs $25,000 to buy, you may use this formula to calculate a 10% down payment:

0.1 x $25,000 = $2,500 Down Payment Amount

You may calculate a 20% down payment on a vehicle by multiplying 0.2 by the vehicle’s total sale price. If the vehicle costs $25,000 to buy, you may use this formula to calculate a 20% down payment:

0.2 x $25,000 = $5,000 Down Payment Amount

6 Benefits of Making a Down Payment on a Car

Some lenders don’t require a down payment on a car at all. Not paying a down payment can be tempting, especially if you don’t have a chunk of cash to spare. But, again, consider how that will impact the length of your car loan (or your term, as it’s called in car loan terminology) and your monthly payments.

Making a down payment brings several benefits you may want to consider as you make your decision. Below we highlight six benefits of making a down payment on a car:

1. Your Monthly Payments Will Likely Be Lower

To state the obvious, the more you pay up front, the less you’ll still owe. That means that potentially, your monthly payments will be lower than they would be if you make a smaller down payment or no down payment at all. That can help your monthly budget going forward.

A classic strategy for lowering car payments is making a sizable down payment when financing a vehicle purchase. Deciding what is a good down payment on a car may depend on what works best for you. Putting 10% – 20% or more down can be ideal if you can afford the up-front payment.

2. You’ll Pay the Car Off Faster

When you pay little to no money up front, you’ve got more work to do to pay off that car loan. Down the road, your loan might even become an upside down auto loan, meaning you owe more than the car is actually worth.

Making a decent down payment on a car may make it easier to take a shorter repayment period (since your monthly payment will be lower). That means you might be able to pay your car off in two or three years, for example, rather than five or six.

3. You May Get a Lower Interest Rate

When you opt for a shorter repayment period, lenders may offer you a good interest rate on a car loan, which means you’ll pay less over the life of the loan.

Also, a larger down payment can indicate to lenders that you’re less of a risk because you’ve made the effort to put more down. That may sway them to lower your interest rate.

4. You May Lower Your Loan-to-Value Ratio

Making a down payment on a car can reduce the loan-to-value ratio of your loan. This ratio, also known as LTV, measures the size of your loan against the value of your vehicle. A higher LTV represents a higher risk to lenders. A lender may offer you better terms and conditions on an auto loan if you reduce the LTV by making a sizable down payment.

5. Avoiding Being Upside Down

As mentioned earlier, a down payment may prevent your car loan from becoming an upside down auto loan. It’s generally not ideal for borrowers to carry a loan underwater. A sufficient down payment may help you avoid carrying a loan balance greater than your car’s appraised value.

6. Improving Loan Approval Chances

Making a down payment on a car may improve your chances of getting approved for financing. Some lenders may deny a car loan application if the applicant seeks 100% financing. Consumers with bad credit may have a harder time securing subprime auto loans without making a down payment on the car.

Recommended: Auto Loan Refinance Calculator

Disadvantages of Making a Down Payment

There are certain disadvantages of a large down payment when car loan shopping. Some of those disadvantages include:

You May Be Cash-Poor

If you don’t have thousands sitting in your bank account to put down on a car, it might be a struggle to put any money down. You may need a car, but you might not be able to easily afford it if it involves a down payment. You may have to wait longer than you’d like while you set aside money so that you can afford the down payment.

Consumers may wonder what happens to car loans when someone dies. The answer is that car loans do not simply disappear when a borrower dies. A surviving spouse or relatives may be responsible for paying the debt, or a lender may move to repossess the vehicle.

You May Not Get a Lower Rate

If you have bad credit, you might not get a lower interest rate when you make a down payment. While bad credit auto loan refinancing and subprime auto loans do exist, they don’t typically offer the best rates, so you may pay more in the long run than if you had good credit and refinanced your car loan.

5 Tips to Save for a Down Payment on a Car

If the idea of coming up with thousands of dollars for a down payment on a car seems daunting, here are five tips to help:

1. Start Saving Early

If possible, start setting aside even just $100 a month as long as you can before you want to buy a car. That way, you’ll have a nice little nest egg saved when you’re ready to buy. Saving $100 a month would get you $1,200 in a year.

2. Cut Your Spending

If buying a car is a priority, you may have to cut back spending in other areas. How much do you spend dining in restaurants? Do you really need all your cable channels? Could you lower your cell phone bill by switching providers?

Investing a few minutes to determine where you can cut back could help you find more cash to set aside for your down payment.

3. Know How Much You Need

It’s easier to save if you have an end number in mind. Shop for cars and decide whether you want to buy a new or used car. Opting for a used car, which is likely to cost less, can also help you save money. Then, research how much the model you want would cost.

From there, decide how much you want to make as a down payment. If you can pay 20% of the price and be in good shape with your monthly loan payment, you’ve got a number you can set as your target for saving.

4. Sell Your Stuff

Most of us have things sitting in our garage or storage space that we no longer use, like exercise equipment or tools. Selling things you don’t need in a garage sale or online could also help you raise some cash.

5. Create a Budget

Creating a budget that cuts unnecessary spending and promotes a frugal lifestyle can help you save for a down payment on a car. A personal budget plan can account for your expected income and your necessary expenses. You can follow the budgetary guidelines to help keep yourself on track toward meeting your goals.

Recommended: Can I Have Multiple Car Loans?

Alternatives to Making a Large Down Payment

If you can’t afford to make a large down payment, you do have a few other options that can keep your monthly payments lower:

1. Trade in Your Old Car

If you have a car you can trade in when you buy another one, it can lower what you pay. It may also mean that you don’t have to make a cash down payment. You can research the trade-in value for your car on sites like KBB, or Kelley Blue Book.

2. Take the Shortest Payment Term You Can Afford

The shorter your repayment period, the lower the interest rate you might qualify for. The average car loan length was almost 69 months for a new vehicle and 67 months for a used vehicle as of the first quarter of 2025, but if you can afford the monthly payments for a shorter period, like 36 months, you’ll get a lower interest rate. Plus you’ll pay less interest over the life of the loan than you would if you stretched out your term.

3. Pay Your Car Off Early

Paying off your car loan early can save you several hundred dollars in interest. Even if it’s a strain to pay extra on your loan each month, you’ll be rewarded with a future of no payments at all. Just be sure to check your contract to make sure there are no prepayment penalties.

Is 0% Down Ever a Good Idea?

Depending on your circumstances, putting 0% down may be a good idea for you when shopping for a car. Making a down payment might not be right for you if it depletes your savings and diminishes your quality of life.

Having a car can be a useful asset to own, even if you purchase the vehicle with 0% down. If you qualify for 100% financing and 0% APR, you may have little incentive to put any money down. As mentioned earlier, determining how much down payment to make for a car is truly a personal choice.

Buying a car is considered a need for most people. A down payment isn’t necessary if you qualify for 100% financing. Some consumers may even prefer to invest their income on something other than a down payment on a car that may depreciate in value.

Recommended: Guide to Finance Charges on a Car Loan

The Takeaway

Making a down payment when you buy a vehicle can make buying a new or used car more affordable and may help you get a lower interest rate.

If you’re not ready to buy right now but want to lower your current monthly car payment, consider refinancing. Car loan refinancing could allow you to lower your interest rate or shorten your loan term, which could save you money over the life of the loan. You could also choose to lengthen your term if you need to reduce your monthly payments, just keep in mind you’ll end up paying more in interest overall.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Is it possible to put no money down on a car?

Yes, it’s possible to get auto loan financing without putting money down on a car. Consumers who qualify for 100% financing do not need to make a down payment when buying a new or used car. Your car loan in that case would cover 100% of the car purchase price, with no money down.

Are there any reasons not to make a down payment on a car?

Yes, there are some reasons why a consumer may not want to make a down payment on a car. Any consumer who cannot afford the up-front expense has a compelling reason not to put money down. The terms and conditions of your car loan, including its annual percentage rate of interest, may also provide you with a reason to forgo a down payment. If you qualify for 100% financing and 0% APR, for instance, you may have little incentive to put money down.

Is it possible to put too much of a down payment on a car?

Yes, it’s possible some lenders may not offer financing if you propose to make a down payment that the lender deems too large. For example, you might not meet a lender’s financing requirements if you’re seeking to put 90% down on a vehicle that costs $25,000. Some lenders may have minimum financing standards that prevent them from offering auto loans less than, say, $7,500.

Photo credit: iStock/Brothers91

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-066

You may extend your car lease contract if you’re not quite ready to give up the car. In early 2025, the average monthly payment for leasing a car was $638, depending on the make and model of the car.

A typical leasing contract can have a 36-month term, according to Kelley Blue Book, but you may request an extension at any point. Sometimes dealers will let you extend your lease on a month-by-month basis. Other times lessees will have to sign up for a preset period of time, such as six months or a year.

Car Leasing Basics

Here are some car leasing basics:

•  Leasing is a form of financing that gives you the privilege to drive a vehicle under certain terms and conditions.

•  Once you settle on leasing, the first step is to decide on what type of vehicle you’d like to lease, and then you’ll negotiate the terms of the lease.

•  When signing the car lease contract, beware there are likely acquisition fees that cover the administrative costs of this process.

•  A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months.

That’s a basic overview on how leasing a car works. If you’re interested in extending your lease, you may request an extension to your leasing term. A leasing company has no obligation to approve you for a leasing extension, but requesting one may open the door to renegotiating an extended term.

What if you extend your lease and then realize the arrangement is not right for you? Don’t panic, and know that there are ways to get out of the car lease, including early termination, a lease buyout, and a lease transfer.

Recommended: Can You Remove a CoSigner From a Car Loan?

Types of Car Lease Extensions

You have the option of extending your lease either formally or informally.

Informal Car Lease Extension

An informal extension is often a temporary measure that helps smooth out the transition between one lease and another.

To take this informal route, you must contact your leasing company and let them know that you want to continue using the vehicle after the lease is up. The company must grant permission for an informal extension. Monthly payments must be paid as they are laid out in the original contract. The extension can then last until the leasing company asks for the vehicle back, usually after six months at most.

Formal Car Lease Extension

A formal lease extension, on the other hand, requires signing a legally binding modification to the lease agreement. The agreement kicks in immediately after the initial agreement ends. A formal agreement may include revised monthly rental fees and a new mileage agreement based on the car’s depreciation over the period of the extended lease.

How to Extend a Car Lease

Here’s a look at the steps it may take to extend a car lease agreement:

•  The lessee contacts the lender through which the original lease agreement was made and says they want to request an extension.

•  The lender reviews the request and determines whether the lessee is eligible.

•  If the request is approved, the lessee will be sent a new contract. This contract will have terms and conditions such as a new end date, mileage allowances, and rental fees.

•  The lessee signs the modified lease document and returns it to the lender.

Exemptions to Car Lease Extensions

There is a chance that a lease extension will be denied. Here are some of the circumstances for which that may be the case:

•  The lessee is behind on lease payments and at risk of defaulting.

•  The leasing company decides it needs to recall the vehicle for other commercial reasons.

•  There is a previous agreement that hasn’t yet expired.

•  The individual did not fill out the lease extension application correctly.

Lease Buyout

If you want to continue driving the vehicle when the lease is up, you may also have the option of a lease buyout. Check your lease agreement to see if this is a possibility.

There are some obvious advantages to a lease buyout. First, you know the car’s entire history, whether you’ve maintained it perfectly or if there have been any troubles. In comparison, individuals buying another used vehicle have much less insight into the car’s past.

If your maintenance of the vehicle leaves something to be desired, or if you put too many miles on the vehicle, your lease could put you on the hook for extra fees to cover the wear and tear. However, a lease buyout could avoid those expenses.

A lease buyout could also end up costing less over time than continuing a cycle of leasing new vehicles.

Those who know they want to buy out their lease from the get-go should let the leasing company know before signing a contract. This can help in negotiating lease disposition fees, which are fees lessees agree to pay to the leasing company upon returning a vehicle.

Downsides of a Lease Buyout

There are also some potential downsides to a lease buyout. For one, staying in the lease cycle ensures that you are always driving a relatively new car. If this factor is important — to your sense of safety, for example — a buyout may not be a good idea.

It’s also possible that a lease buyout can end up costing you more than other options. For example, buying out a lease without making a new down payment may lead to monthly payments that are higher than lease payments.

Also, buying out a leased car may be more expensive than buying a similar used car on the open market that’s just a little bit older.

Recommended: Can You Refinance a Car With the Same Lender?

Financing a Lease Buyout

If you decide you want to buy out your lease, you can pay for the car in cash, if you have enough on hand, or you can seek financing.

Some financial institutions offer lease buyout loans. It’s best to shop around for financing terms that are right for you. Shorter loan terms tend to come with higher monthly payments, though individuals may end up paying less interest over the life of the loan. A long-term car loan, meanwhile, may feature lower monthly payments and higher total interest costs.

The annual percentage rate (APR), which represents the yearly cost of carrying a loan, tends to be higher for lease buyout loans than new car loans.

Recommended: Auto Loan Requirements and Approval

Refinance a Car Loan

In the future, if auto loan payments become untenable, an individual’s financial situation improves, or interest rates drop, it may be worthwhile considering an auto loan refinance.

When refinancing a loan, borrowers take out a new loan to pay off the old one. Ideally, this new loan will free up some cash by offering a lower interest rate or better terms that make monthly payments easier to manage. Individuals may use their increased cash flow to pay off the loan faster or to focus on other financial goals.

Refinancing an auto loan may be easier than having someone take over your car loan, particularly if you have good credit.

Recommended: How to Refinance a Car Loan

The Takeaway

If you have a car lease, you may be able to extend it, either month by month or for a specific period, to continue using your vehicle without buying it or returning it. There are, however, times that a car lease may not be extended or when other options could be a preferable alternative.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

How do I initiate a car lease takeover?

Leasing companies may allow you to take over someone’s lease, or transfer yours to another party. Each company has different requirements to initiate the process, so contact the lessor to find out what steps to follow.

Can you extend a lease on a car?

Yes, you can typically extend the lease on a car, unless you don’t meet the lessor’s requirements or they need to recall the vehicle.

What are my options at the end of a car lease?

At the end of your lease, you can return the car to the leasing company, extend your lease, or initiate a lease buyout.

Photo credit: iStock/Anastasiia Havrysh

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-065

Your car’s suspension helps maximize your vehicle’s performance and ensures you have a smooth ride as you’re driving down the road. The suspension system consists of shock-absorbing components that increase friction with the road to ensure your tires are making a good connection with the pavement. This helps smooth your ride by absorbing energy from bumps in the road.

As you might imagine, your suspension is subject to a fair amount of wear and tear, and there are many components that may eventually need repair or replacing.

Here’s a closer look at how much you can expect to pay to replace your suspension system, signs your suspension system may be failing, factors that impact repair costs, and more.

How Much Does a Suspension Repair Cost for a Car?

Repairs to your suspension system can cost anywhere from $1,000 to $5,000, depending on what went wrong and what needs to be replaced. Wheel alignment, for example, may be relatively inexpensive, costing $20 to $400, while shock absorber replacement could cost as much as $1,500.

How Do I Know I Need a Car Suspension Repair?

When your car’s suspension system is not working properly, there are a number of symptoms you should look out for, including:

You Feel Every Bump in the Road

Your car’s suspension helps keep you from feeling bumps and potholes in the road. As it breaks down, you may start to notice these in the main cabin of the car. Not only may the impact of bumps increase, but you may feel them for longer.

Your Car Is Harder to Steer

A car that bumps around more than usual may be more difficult to control. What’s more, depending on where repair is needed, your car may pull to one side, which will force you to constantly compensate as you’re steering.

You Notice Irregular Tire Wear

When your car is functioning properly, the treads of your tires should wear evenly. Uneven wear can signal problems with your suspension. You may consider having your tires rotated as soon as possible to stave off the need to replace them.

Your Car Squeaks While Driving Over Bumps

A failing suspension can also be quite noisy. Your car may make all sorts of sounds, including squeaking, clunking, or grinding, depending on which part of the system is failing.

Your Car Sits Low on One Side

If your car tilts to one side while parked on a level surface, suspension components on that side of your car may be failing.

Your Wheel Alignment Is Poor

Misaligned wheels can put stress on other components of your suspension system. Wheels that have fallen out of alignment can make steering feel sloppy or like your car isn’t responding correctly when you move the wheel. Having your wheels aligned can fix these issues and help prevent future problems.

Your Struts Are Worn Down

Your car will either have shock absorbers or struts. Worn down struts can make a knocking noise when you drive over bumps.

Your Shock Absorbers Are Worn Out

Failing shock absorbers have a hard time keeping your tire on the pavement. As a result, your car may bounce, shake, and vibrate more when it goes over bumps.

Recommended: Guide to Transmission Replacements

What Factors Impact Suspension Repair Costs?

If you’ve noticed one or more of the above signs, your suspension may be failing and need to be repaired or replaced. You should bring it to a reputable auto mechanic as soon as possible. The cost to repair or replace suspension components will depend on a number of factors, including:

The Make and Model of Your Vehicle

The make and model of your vehicle tells you the brand of your car, the type of car, and the year that it was made. Cars that are common and popular may be cheaper to repair. SUVs, luxury vehicles, or rare automobiles that require specialty parts can be more expensive to repair.

Recommended: How Much Is My Car Really Worth?

The Severity of the Damage

A failing component can cause a cascade of damage. Cost will depend on whether or not you simply need to repair one part or if you’ll need to replace a multitude of parts. Be aware that suspension components often come in pairs, which means you’ll need to replace both parts on your vehicle, which can increase labor costs.

The Parts Required for Repairs

There’s a wide range in cost for the actual components. Shock absorber replacement can run you $200 to $1,500, coil spring replacement may cost $550 to $700, strut replacement can run up to $900, and wheel alignment can cost $20 to $400. You may or may not need multiple repairs and replacements in one single visit.

The Brand of the Suspension Component

Different brands of components will provide different design, quality, efficacy, and durability. You may choose lower cost brands, but you may lose some of the qualities listed above. Pricier brands may last longer and need to be replaced less frequently, which can save you money in the long run.

The Mechanic You Choose

The price to repair a suspension system will vary depending on location and the mechanic you choose. You may want to get a quote from several mechanics to help ensure that you’re receiving a fair price.

Recommended: Smarter Ways to Get a Car Loan

4 Ways to Cover Suspension Repair and Replacement Costs

When it comes time to pay your bill at the auto mechanic, you have several options to cover your cost.

Cash

Cash is by far the cheapest way to cover the cost of auto repairs since paying in cash doesn’t involve interest payments. However, if you don’t have enough cash on hand to pay for the repairs and cover other necessary immediate expenses, you may consider financing options.

Recommended: How Much Does a Car AC Compressor Cost?

Credit Card

Credit cards may be a good short-term financing option if you believe you can pay your balance in full at the end of the billing cycle. Credit card companies tend to charge relatively high interest rates, which are currently hovering around 21%, according to the St. Louis Federal Reserve (FRED).

If you pay your credit card in full each month, you may avoid interest payments. However, if you carry a balance, your debt can become increasingly expensive.

Personal Loan

A personal loan for car repairs allows you to borrow a lump sum of money which can be used for a wide variety of purposes — including auto repairs — and paid back in regular monthly installments. Interest rates on personal loans tend to be much lower than credit card interest rates, currently averaging 11.57%, according to FRED.

As with credit cards, your credit score will help lenders determine what interest rates to offer, with preferred rates going to borrowers with the best scores.

Recommended: Car Axle Repair and Replacement Costs

Auto Loan Refinancing

Refinancing your auto loan can be a way to save money that can then be used to pay for auto repairs. When you refinance a loan, you take out a new loan to pay off your old loan. This new loan will hopefully have a lower interest rate and may have a lower monthly payment. You can also lower your monthly payment by lengthening your loan term. Beware that in doing so, though, you will be paying interest for longer. This can ultimately increase the cost of your loan.

You can also consider a cash-out auto loan refinance, which gives you cash back when you take out your new loan. This money can then be used to pay for your suspension replacement.

A car loan refinance calculator can help you determine your potential savings.

The Takeaway

A functioning suspension system is critical to your ability to drive your car safely and comfortably. Watch out for the signs that your suspension is failing and if you notice it is, talk to an auto mechanic as soon as you can. Getting ahead of small problems now can potentially help you head off bigger problems down the road that can end up costing you more.

Replacing a suspension system can come with a price tag in the thousands of dollars. Carefully consider your financing options, and choose the option that works the best for your situation.

If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.

FAQ

Is it worth it to replace my suspension?

Yes. To drive your car safely and comfortably, you may have no choice but to replace certain components of your suspension system.

Can you drive a car with a damaged suspension?

It is unadvisable to drive a vehicle that has a damaged suspension system. If you suspect your car is in need of repair, take it to a reputable auto mechanic immediately.

What are some common signs that your car’s suspension needs repair or replacement?

Common signs of suspension issues include unusual noises (such as clunking or squeaking), uneven tire wear, poor handling, and a bumpy or unstable ride. Recognizing these symptoms early can help prevent more extensive and costly damage.

Photo credit: iStock/Scharfsinn86

SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOALR-Q325-064