Can I Get a Car Loan at 18 Years Old?

It is possible for 18-year-olds to get car loans, but they may face challenges due to their limited credit history.
Written by Bonnie Stinson
Reviewed by Jessica Barrett
background
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.
  • 18-year-olds can get
    car loans
    , 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.
  • Be sure to consider the costs of car ownership—
    car insurance
    , maintenance, and
    repairs
    —when calculating your budget.

Yes, car loans exist for teens

Teenagers who are of age are technically eligible for
car loans
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.

Save up for a bigger down payment

  • A larger
    down payment
    will show lenders will see that you are more responsible than the average borrower—even if you don’t have a long credit history
  • A big down payment can help bring down the overall cost of your loan and improve your deal (hello, lower interest rates!)
  • If you want to make yourself more attractive to mainstream lenders, aim for a down payment that is 20% of the purchase price

Look for special financing programs for first-time car buyers and students

  • Some lenders and car manufacturers offer special deals for
    first-time car buyers
    and students
  • 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

Use a buy here, pay here dealership

  • There are pros and cons to
    buy here, pay here (BHPH) dealerships
    , but they could be a good option for first-time buyers with minimal credit history
  • These dealers can help you get a car but they might charge you extra money for their help

Apply with a local credit union

  • Car loans from credit unions
    can be great options for teens who need help with a loan
  • Credit unions can be more open to financing risky borrowers, especially if they’re local community members

Get a cosigner—a parent, family member, or close friend with good credit

  • A cosigner is someone who will share responsibility for your loan
  • A cosigner with good credit history 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
    actual cash value
    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 interest rate are more important than the monthly payment amount. 
MORE: How to choose the best car for a teenager

Additional costs you need to plan for

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.
    Jerry
    can help you compare rates and find discounts, like the “
    good student
    ” discount.
  • Daily expenses: You’ll need to fill up your tank with gas and pay for parking.
  • Maintenance:
    Regular maintenance
    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
    repairs
    .
  • Deductible: Did you know that most car insurance doesn’t cover 100% of costs after an accident? You’ll need to pay your
    deductible
    out of pocket before insurance will kick in.

Alternatives to loans for financing a vehicle purchase

If you’re under 18 or can’t qualify for an auto loan, there are still ways to obtain a vehicle. 
  • Save up and pay a lump sum: You’ll have to work hard, but over time you can save up enough money to
    pay cash for a vehicle
    . This means no monthly payments and no interest!
  • 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.
“I got my first car and didn’t have a clue about insurance.
Jerry
is a great app that’s super helpful AND super free. It’s a great resource for young people.” —Helena O.
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