Purchasing a car is at the top of the list for a lot of young American citizens. Some out there are entrepreneurs and hard at work to pursue their dreams. Still, laws in the US treat minors under the age of 18 a bit differently, especially for legal loan contracts.
If you’re wondering how old do you have to be to finance a car, we’ve got the answer to that below. Plus, we’ll share the typical requirements to qualify for an auto loan so that you’re ready to purchase once you turn of age.
How Old Do You Have to Be to Finance a Car?
If you’re a teen reading this, we’re going to give you an answer you might not want to hear. But, just be patient and we promise the time will come! In order to qualify for financing in the US, all citizens must be at least 18 years of age.
Up until 18, teens are still considered minors, which puts them in a separate category from adults. Having that said, you have to be at least 18 to enter into a binding contract or become a co-signer or co-buyer on any item.
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What About a Cash Purchase?
Choosing to purchase your car with cash is an option, though some requirements come along with that too. First of all, coming up with cash can be difficult but, it’s not impossible. Secondly, some states do not allow minors under 18 to have a driver’s license.
Even if you do have the cash to purchase a car as a minor, you’ll still need to look out for a few things like:
- Your insurance
- Your ID
- The title
All of these things are important when purchasing a car but are not the first things that pop into a minor’s head. Keep your head straight and know what you need in order to purchase a car as a minor or young adult.
Auto Loan Requirements
After hearing how old do you have to be to finance a car, you might have thought of it as good news or bad news. The thing is, no one should enter into a binding contract at a young age, keeping away from buying into deals and getting taken advantage of.
On top of that, car loans are not so easy to take out, as lenders will look at several things before they approve or disapprove your contract. In order to qualify to finance a vehicle, you’ll need to meet the following requirements.
A Medium to High Credit Score
Just like with any other loan, you’ll need to have a decent credit score. While there are some lenders out there that will approve lower scores, not all of them will, which could look bad on you in the end.
As a young adult or minor, you more than likely do not have any kind of credit, something that will keep you from qualifying for an auto loan.
Plus, if you do by some chance get qualified, you may be looking at very high-interest rates that will take ages for you to pay back.
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All lenders out there also have requirements when it comes to your level of income. That means that you will have to prove that you make over a certain amount every month, through employment at a steady job.
On average the amount that lenders are looking for falls between $1500 and $2000, which could be much lower than many young workers make. In the case that you do qualify, you could still have to wait to finance until you hit 18 years of age.
A Roof Over Your Head
On top of everything else, you also have to have a roof over your head. Lenders like to see a permanent residence, one where they know where your car will be parked. This helps them if they ever need to track it down due to lack of payment or just for other records as well.
A Valid ID
On top of it all, you have to have a valid ID like a driver’s license to go along with it. This is what they will use to prove your age and to make sure that you don’t have any kind of outstanding tickets or violations. Though some states allow licenses to 16 and 17-year-olds, it won’t work when trying to qualify for an auto loan.
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Finding the Best Financing
One thing that all first-time car buyers should look out for is financing. Basically, they need to shop around and know what a good rate looks like in order to get the most bang for their buck. A few things to look out for before financing a vehicle include:
The Interest Rate
The interest rate is a big deal and something you should try to get as low as possible. While you might not qualify for 0%, try to stay low and don’t sign if the rate is too high. If you can, ask your parents to co-sign to knock the price down.
Some lenders will allow you to finance for up to 6 years. While the monthly payments might seem low and great, the fact of the matter is you’ll have to pay the same price month after month for 6 whole years.
Wait it Out and Save Up
Just because you don’t qualify for a loan doesn’t mean that it’s the end of the world. As a matter of fact, it could turn out to be a good opportunity to save up. The more you save the less you will have to finance and the lower your interest rate.
Young drivers have the option to purchase a car with cash and skip the financing, though they might need to check for qualifications like insurance at the end. 18 is not too far away and waiting it out might turn out to be the best plan if you’re ready to get 4 wheels.
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