First-time car buyer programs: What they are and how to apply
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Key takeaways
- First-time car buyer programs offer flexible qualification requirements and other incentives to make it easier for those with little or no credit history to finance their first car purchase.
- These programs typically have eligibility criteria such as being at least 18 years old, providing proof of employment and demonstrating the ability to repay the loan.
- To secure the best deal, it is important to research and understand the process before visiting a dealership.
As a first-time car buyer, the process of getting an auto loan may seem daunting, especially if you have little or no credit history. However, programs exist to help ease the path to car ownership. First-time car buyer programs, offered by lenders and automakers, are specifically designed to assist people in financing their first car.
What is a first-time car buyer program?
These programs are tailored for those with little or no credit history. They make finding financing easier if you are buying your first car. These financing options tend to have less stringent requirements than traditional auto loans. For example, many do not require you to have an established credit score at all.
Some programs also offer incentives like a lower interest rate after a certain period of on-time payments or vehicle rebates on the car’s purchase price.
Rates vary by program, but you will likely see higher rates than you would with an established credit history. Lenders use credit scores to see if you have a history of repaying loans on time. If you don’t have a credit score, they’re likely to see you as a higher risk for defaulting.
These programs may offer a limited range of loan terms. You may be offered a longer maximum repayment period if you have a credit score.
Where to find a first-time car buyer program
These programs are offered by lenders and can be found through online research or at dealerships.
- Lenders: Traditional lenders, like banks and credit unions, may have special offers for those purchasing their first vehicle. These programs might not be advertised prominently, so check with your own bank first.
- Automakers: Programs through dealerships and automakers may be easier to come by. Start by exploring dealerships in your area and the automaker’s website.
First-time car buyer program requirements
Qualification criteria tend to be less strict than with traditional auto loans. However, there are some basic requirements across most programs.
- Credit score: Unlike traditional auto loans, these programs are designed to assist people with limited or no credit history. But if you do have a healthy credit history, you may find a more competitive rate.
- Employment: Many programs request employment information to assure the lender you can afford the payments. Audi, for example, requests proof of income along with contact information for your employer.
- References: Some programs may request personal references for the dealership to reach out to. Audi requests two personal references, one from a relative, with a phone number and address.
Navigating the car dealership as a first-time buyer
Buying your first car involves more than just choosing a car and securing a loan. It’s also about effectively navigating the car dealership and understanding potential risks.
- Research vehicles in advance: Research what vehicle you’d like to purchase. First-time buyers can also benefit from learning the auto financing process to be as informed as possible.
- Create a budget: Create a budget that allows you to save toward a large down payment. It’s recommended you calculate and save 20 percent for a new car and 10 percent for used. This will help you get the best deal on a vehicle and the best interest rate.
- Ask about additional fees: It’s always a good idea to ask about fees that could make repaying your loan more expensive. For example, some lenders charge a prepayment penalty if you pay off your loan early.
- Ensure you meet credit requirements: Ensure that you have a strong enough credit history for the particular program and that you meet your repayment commitments.
- Seek advice: Speak to an older sibling, parent or someone else close to you with experience buying cars. You may wish to bring them to the dealership while you shop to provide advice and help you spot red flags.
And while it can be tempting to go for the shiny new model with all the latest features, remember that a more modest car can still be reliable and meet your needs. Lastly, don’t be afraid to negotiate the price of the car and always read the fine print before signing any contracts.
