How to Get a Car Loan at 18

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - November 30, 2018

You can purchase a car when you’re 16 or 17, but you have to be 18 in order to apply for an auto loan and finance a vehicle. Once you turn 18, you’re no longer a minor in the US and are legally able to take on debts, such as financing a car.

Qualifications for a Car Loan

Buying and financing your first vehicle can be exciting, but also stressful. In addition to the requirement of being at least 18 years old to sign a legal contract, you must meet an auto lender’s basic requirements in order to get approved for financing. These includes two things which could be a challenge for first-time car buyers:

  1. Credit – Chances are you have little to no credit history as an 18-year-old. This could be an issue when it comes to auto financing, because lenders place a heavy emphasis on your FICO score and credit reports. When dealing with limited or even no credit history, you may find it easier to get financed through a subprime lender instead of a traditional one.
  2. Income – In addition to credit, lenders place a heavy emphasis on your income. For most subprime lenders, you can expect them to require a minimum monthly pre-tax income of $1,500 to $2,000. Also, keep in mind that these lenders like to see a steady income, and may ask to see up to three years of work history, with at least six months at your current job.

If your credit is poor and you don’t quite meet the income requirement, but you have a spouse, you aren’t totally down for the count on auto financing. One of the best ways to get approved for financing when you don’t meet the minimum requirements is to have a co-borrower. You get to “borrow” their good credit and combine their income with yours to qualify for a car loan, and start building your own positive credit history.

Getting a Car Loan at 18 without a Cosigner

Unfortunately, not every 18-year-old has a spouse, or someone willing to cosign on a car loan. Where do you go if you can’t get a cosigner? There are other ways you can increase your chances for approval without the help of a cosigner:

  1. Have a large down payment – You have to make a down payment when dealing with a subprime lender, but a bigger down payment can improve your chances of approval. If you’re able to, try for a down payment closer to 20 percent of the vehicle's selling price, which also sets yourself up for a more successful auto loan.
  2. Establish and build credit – If you don’t need a car loan right now, wait it out and build up your credit. You can apply for a credit card, become an authorized user on someone else’s credit card, or take out a credit builder loan. As long as you make regular payments and keep up with your monthly bills, you should see your credit score increase over time.
  3. First-time buyer programs – Some lenders offer first-time buyer programs, which are great for young consumers who don’t have a cosigner. These programs, like subprime auto loans, require proof of income or a copy of your employment contract, and more than likely have a slightly higher interest rate.
  4. Buy here pay here dealerships – If subprime lending or a first-time buyer program isn’t in the cards and you need a car now, you can turn to a buy here pay here (BHPH) dealership. BHPH dealers finance their vehicles in-house, use your income to determine approval, and typically don’t run credit checks. While you do get approved for a car loan, unless the dealer says otherwise, any payments you make on time aren’t getting reported to the credit bureaus, so your credit score probably isn’t going to improve.

Ready to Start the Financing Journey?

It’s okay to feel overwhelmed about buying your first car at 18. But very few 18-year-olds have the credit and income to qualify for a traditional auto loan, and may need to consider subprime loans or first-time buyer programs. If you need a car loan, but aren’t sure where to start looking for financing, let CarsDirect help.

We work with a coast-to-coast network of dealerships that have the lending resources available to help people with little to no credit. Get the process started by filling out our auto loan request form right now. It’s free of cost and comes with no obligation to buy anything.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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