As a rule, high school students aren't able to get a car loan in the US because the minimum age for entering into a legal contract is 18. Even though some students reach the age of 18 before graduation, meeting all the requirements necessary to qualify for a car loan can be difficult as a teenager.
Subprime Lenders
There are lenders that can look beyond credit scores or thin credit files. They're called subprime lenders and they work through special finance dealerships. These lenders are able to use factors other than a potential borrower’s credit score and credit history to get customers approved for auto financing. However, meeting the requirements of getting a car loan can be difficult as a teenager.
Even 18-year-old high school seniors who are legal adults can have difficulties getting an auto loan because the factors required – namely, credit score, verifiable income from a steady job, and proof of residency – are things typical high school students don’t have.
The Requirements for a No Credit Car Loan
When someone buys a vehicle from a special finance dealer, they're required to bring in certain documents and meet certain requirements. Let's take a look at the typical requirements for an auto loan in this situation:
- Proof of income: A current computer-generated check stub showing year-to-date income. Most lenders like to see an income of at least $1,500 to $2,000 a month, from a single source.
- Proof of employment: Minimum time required on the job varies by lender. Typically, they're looking for at least six months on a current job, and a minimum of three years of employment.
- Proof of residency: This is typically a bill in your name delivered to the address listed on the application.
- A down payment: Generally, you're required to put down a minimum of $1,000 or 10 percent of the car's selling price, whichever is less.
- Proof of a working telephone: This needs to be a landline or contract cell phone in your name.
Because of the limitations an 18-year-old typically has, meeting these qualifications can be difficult. However, if you're 18 or older, employed, and can save up some money for a down payment, there may be another way to get auto financing: a buy here pay here (BHPH) dealer.
Using a Buy Here Pay Here Dealer
BHPH dealerships offer in-house financing, meaning they take care of the entire process of financing and selling you a vehicle all in one place. These dealers are lenders, so it can make for an easy, one-stop shop when you need a car fast!
At these dealerships, you aren't going to find the newest models or vehicles with the lowest miles, but if you need transportation while you're building credit, this could be the answer. These dealers don't typically check credit, but they do make sure you can afford the loan by calculating your debt to income and payment to income ratios.
Be aware that because these places don't usually check your credit, they don't always report loans or payments to the credit bureaus, either. This means a car loan from a BHPH dealership doesn't help to improve your credit the way other loans could. So, you have to work on building credit using other means until you're able to get an auto loan through a traditional or special finance dealer.
Once You Meet the Requirements
If you're 18 and need a vehicle, it may be difficult to get a loan through traditional channels. But, if you take the time to prepare and meet the qualifications, a subprime lender may be just the ticket. These lenders can help people in unique credit situations such as no credit, bad credit, or bankruptcy, get loans for the cars they need. Here at CarsDirect, we can help you get in touch with a dealership that works with these lenders. Simply fill out our no-obligation online auto loan request form to get started right now!
