It’s possible to get a car loan at 18 years old if you approach specific kinds of lenders, convince lenders that you’re worth the risk, or save up for a big down payment—but 18-year-old drivers also have other options.
, but they may face challenges due to their limited credit history.
Options for obtaining a car loan include finding a lender specializing in poor credit or no-credit borrowers, making a larger down payment, or getting a co-signer with good credit.
Avoid common mistakes when shopping for a first vehicle, such as focusing only on new cars, not doing research, and not shopping around for the best loan offers.
but may have more difficulty qualifying for a loan than someone with a more established credit history.
Most lenders prefer to loan to a person who has stable credit—and most 18-year-olds usually have little to no credit history.
Keep in mind: Lenders who are willing to loan money to no-credit borrowers typically charge higher interest rates. This means that a teen will pay more over the long run for the privilege of taking out a loan.
MORE: What credit score is needed to buy a car?
How teens can finance a vehicle
Once you turn 18, you are eligible to get a solo loan under your own name. You’ll need to convince auto lenders that you’re worth the risk. Here are some tips to help.
Find a lender that specializes in low or no-credit borrowers
Some lending institutions that focus on helping people with bad credit or limited credit—these are referred to as sub-prime lenders and they are your best bet for getting a loan as an 18-year-old
These lenders will need to see some kind of proof of income so they know you can make your loan payments on time
Before you approach the lender, prepare your proof of a reliable source of income—bank statements showing regular deposits and a letter from your employer are ideal
Depending on the price of your dream vehicle, you may need to show a monthly income of between $1,500 to $2,000. Six months at your current job will be helpful, but longer is even better.
Instead of looking at your credit history, these lenders use factors like your GPA and the size of your down payment to help you qualify for a car loan
can counteract your own credit status, helping you qualify for a loan with a mainstream lender
This strategy usually earns you a lower interest rate, too
One word of warning: Your cosigner is legally tied to the loan, just like you. If you fail to make payments on time, it will negatively impact your cosigner's credit score—so be sure the relationship can handle the stress.
Avoid these mistakes when shopping for a first vehicle
It’s normal to make a mistake when it’s your first time doing something—but making a mistake while buying your first car could be very costly. Let us help you avoid some classic pitfalls.
Buying a new car: Did you know that a new vehicle loses about 20% of its
after one year? Fancy features and a brand-new vehicle are attractive, but a safe and reliable used car (even just a few years old) could save you a ton of money.
Not doing your homework: It’s important to research the average car prices for your desired make, model, year, and accessories. This strategy means you are prepared to negotiate for a fair price at the dealerships in your area.
Not shopping around for car loans: Shop around to compare rates and eligibility requirements. This will help you find the best deal for a first-time borrower like yourself.
Spending too much: Make your budget before you start browsing listings and test-driving vehicles. Know how much you can realistically afford to spend so you don’t wind up with a too-high monthly car payment (and no money for takeout).
Paying too much attention to the monthly payment amount: Loan contracts can be very tricky, so pay close attention to the details and know how much your overall cost will be. The loan term (or length) and
The purchase price is just the first expense you’ll need to cover as a car owner. Welcome to adulthood! Here are some additional costs you should include in your budget.
Car insurance: Insurance companies consider young drivers the riskiest drivers on the road, so expect high rates until you prove yourself to be a safe driver.
is important to the safety of your vehicle. This means changing the oil every 10k miles, rotating tires, and getting new windshield wipers when yours wear out.
Repairs: Problems are bound to crop up. An emergency fund is a smart way to prepare for surprise
See if your parents can loan you the amount: Not all parents can fork over a huge amount, but it’s worth asking. If you’re willing to pay back the loan amount, they might be convinced.
Get your parents’ help with financing: Ask your parents or relatives if they’d consider matching your savings up to a certain amount. This is a great way to demonstrate your responsibility and get some help in the process.