Your first car is an important and memorable purchase. Unfortunately, many people who want to buy their first new car have little or no credit history. Here are some tips to help you buy a new car if you are just starting out but really want one.
Find a co-signer.
Having a co-signer is one of the easiest ways to buy a new car even if you have no credit history. A co-signer is an adult with a credit history who not only vouchs for you but is also legally responsible for the car payment if you don't pay. A co-signer is usually a parent, relative, or close friend. Most of the time, having a co-signer will help you get approved for a new car loan and also help you build credit.
Pay a big down payment when you buy a car.
If you don't have much of a credit history or if it's new, banks may be willing to take a chance on you if you put a lot of money down on the car. For example, if a car costs $20,000 and you put down $10,000, you might find one or two banks willing to take the risk that you won't stop paying. Your car is used as security by banks. If you can't pay for your car, the bank will take it back and sell it to get the money it loaned you back. The value of most homes goes up over time, but the value of most cars goes down quickly. In fact, just driving a car off the lot can cause it to lose 20% or more of its value. A big down payment can make it less risky for the bank to give you a loan.
Find a local credit union or bank.
Many credit unions and community banks are more likely to lend you money if you are a member. This is especially true if you have family members who use their bank or have loans through it. Again, banks don't like taking risks, but if they know your family, they might be able to work something out. It will probably have a higher down payment than usual and a limit on how much can be borrowed.
If you want to buy a new car but don't have a long credit history or no credit history at all, use the tips above to get a loan. A car loan is a great way to start building a good credit history. Since a car loan lasts between 3 and 5 years, lenders can get a good idea of how well you pay your bills.
Get credit
If none of the above options work for you, your best bet is to take some time to build credit. This can be done by getting one or two credit cards and using them wisely for a few years. Once you have a good reputation, banks will be glad to do business with you.
