Are First-Time Car Buyer Programs Right For You?
It’s a familiar jam: You need credit history to get an auto loan, but most lenders are reluctant to give auto loans to people with no prior credit history. What's a novice car buyer to do? Fear not — credit union first-time car buyer programs and other lenders catering to rookies have found the formula to shift things into gear.
But are first-time car buyer programs right for you? This guide explains everything you need to know about these programs, including their pros and cons, so that you can decide for yourself. We also discuss how to qualify for first-time car buyer programs and help you find credit unions that offer this service with our Credit Union Locator Tool. So, buckle up. We're hitting the road to becoming a savvy car owner!
What are First-Time Car Buyer Programs?
First-time car buyer programs are loan services offered by lenders like credit unions or vehicle dealerships. They function as a way to bypass traditional auto loans that may not be as favorable to new lenders.
Although first-time car buyer programs are more forgiving, you must still qualify and apply for approval. On the bright side, these requirements are much less rigid than traditional auto loans. That goes double for credit union first-time car buyer programs, as credit unions focus less on company profits and more on member service.
How to Qualify for First-Time Car Buyer Programs
Let’s look at the standards most first-time car buyer programs consider when assessing whether or not to give a loan.
Although requirements vary by lender and the laws of each state, typically, you have to be at least 18 years old. Alas, that puts a damper on 16-year-olds hoping to make the most of their new license.
As is common for lending services, your credit score is a crucial factor. While some credit union first-time car buyer programs may still approve loans for people with poor credit histories, interest rates will be higher than for those with better credit scores. Even if you have no credit score or history, some lenders will still give you a high-interest rate to play it safe.
There is a silver lining, though. Some programs offer a rate adjustment after you’ve successfully completed a certain amount of payments on time. That means if you’re diligent about making payments, you could essentially lower your interest rates.
Your income level doesn’t have to be anything extravagant, but it should verify that you’ll be able to pay back the loan installments comfortably.
For starters, you’re going to have to show proof of employment. You don’t need to have been working long, but you certainly need to show your lender that you have a steady income necessary to repay the loan.
Again, how to qualify for first-time car buyer programs depends on many factors, including the specific lender and the laws of the state. However, criteria like having a mailing address or proof of car insurance are common.
A lot of people worry that first-time car buyer programs will require a college degree or current enrollment, but that’s not true. Often you can still qualify for an auto loan without needing to attend college.
Types of Car-Buyer Programs
Instead of asking flatly, "Are first-time car buyer programs right for you," ask yourself what kind of program works for you. Many of the variables in auto loans for first-time car buyers depend on who offers the program, so review the details to find the best option for you.
Manufacturer or dealership programs
Some car manufacturers or licensed dealerships offer first-time car buyer programs directly so that you can pay off your debt right to the source. While these typically offer standard auto loans to people with longer credit histories, they also have unique options for first-time buyers, as long as you meet the criteria. Always check for what programs they offer before visiting so you know what to expect.
Bank/credit union programs
Banks and credit unions may offer auto loans for first-time car buyers, with special criteria and rates to accommodate people who have never owned a car. Your first stop should be the financial institution where you already have an account, as they'll most likely approve.
Keep in mind that only some financial institutions advertise their first-time car buyer programs, so try asking directly if you need help finding something online.
Other third-party programs
As a last resort, you can try using a third-party lender. For example, subprime lenders specialize in offering loans to people with poor or no credit scores, as do other lending services.
However, typically you can find better rates working with another partner, like your local credit union. So we recommend checking these first.
Pros and Cons of First-Time Car Buyer Programs
First-time car buyer programs can be a lifesaver for people with credit problems, but it's not a perfect solution. Review their pros and cons below to see if it sounds right for you.
Pros of first-time car buyer programs
If you've never financed a car, first-time car buyer programs can be exactly what you need. After all, they're designed for people just like you! Here's what you can expect for benefits with a first-time car buyer program:
- Flexible interest rates. First-time car buyer programs tend to have different interest rate options, so you can choose the one that suits you.
- Lower down payments. While some auto loans require a hefty down payment, first-time car buyer programs usually have lower ones because they understand the financial restraints of new buyers.
- Better loan terms. Choosing the right lender will make your loan terms comfortable, which isn't always true of other auto loan programs.
- Financial development. If you can't get an auto loan because you don't have any credit history, a first-time car buyer program can help you establish healthy credit for future loans.
Cons of first-time car buyer programs
As mentioned above, first-time car buyer programs have their drawbacks. It’s better to know what you’re getting into instead of getting blind-sided after you’ve signed. Here are some disadvantages to prepare yourself for:
- Higher interest rates after the promotional period. First-time car buyer programs tend to offer attractive low rates to start, but sometimes these rates increase in time, locking you into paying more.
- Limited vehicle options. Because you’re considered a potential financial risk in the eyes of lenders, they may limit the kinds of vehicles you can get with a first-time car buyer loan.
- Higher monthly payments. Lenders need to make sure they get their money back, so the monthly payments tend to be higher than they would be for those with exemplary credit history.
- Long-term financial obligations. Signing into a first-time car buyer program is not a decision to be taken lightly. You’re committing to a long-time contract with regular payments, so be prepared for the long haul.
How to Apply for First-Time Car Buyer Programs
Interested in getting a first-time car buyer program? Here’s a step-by-step process to make sure you get the best deal.
1. Research programs
First things first, figure out all your options. Research all the available first-time car buyer programs in your area so you can make an informed decision. Consider what kind of car you want to buy, how much you can afford for a down payment, and what you can comfortably afford for monthly installments. Knowing these details will make your decision a lot easier.
Also, be sure to account for credit union first-time car buyer programs as well as other traditional loan services.
2. Compare rates and loan terms
Once you've collected the data on all your choices, you can effectively compare them to find the best one. Sometimes when you view your options back-to-back, the best choice is clear; other times, it'll be a toss-up where you have to think hard about your priorities.
The important thing is to be realistic. If you’re worried about whether or not you can afford a certain monthly rate, it’s better to play it safe than “figure it out later.”
3. Check your credit score
Before you sign a contract, double-check your credit score so you're prepared when you meet with the lender. They will certainly check it; it's also best to know it so you're both on the same page. Going into negotiations without knowing your credit score puts you at a disadvantage — the fewer surprises, the better.
4. Gather necessary info and documents
If you go through with the first-time car buyer program, you’ll need some personal details and official documents for the paperwork. Have these ready so you can get the ball rolling as soon as possible.
Specifically, make sure you bring:
- a government-issued ID
- your Social Security number
- your contact information (address, phone number, email, etc.)
- proof of employment and income (e.g., a pay stub or financial statement)
5. Negotiate and apply
It's perfectly acceptable to negotiate the purchase price of a car — even your first car — so don't be timid. You may have little wiggle room as a first-time car buyer, but it's still worth it to try.
When you’ve settled on an agreement, go ahead and submit your application. It will take some time to go through, but if you’re prepared and meet all the criteria, it’s just a matter of waiting for the approval.
Further Resources on First-Time Car Buyer Programs
Want to know more about first-time car buyer programs and how they can help you? Here are some additional resources with more information:
- What’s different about your first car? Edmunds offers a guide for first-time car buyers who aren’t sure what to expect.
- Compare multiple programs. Finder.com is known for its comparison charts, which are handy for comparing loan details.
- Research automakers. Inside Car Guys gives you the “inside” scoop on which automakers offer the best first-time car buyer programs.
Cruise with a Credit Union First-Time Car Buyer Program
Now that you know how to qualify for first-time car buyer programs, it's time to put the pedal to the metal and drive away with a loan that works for you! Because credit unions are run by the people who actually use them, they typically offer lower fees and better interest rates on credit union first-time car buyer programs.
Don't settle for less; go with the credit union advantage, and you can put your loan acquisition efforts on cruise control. To find credit unions in your area, use our free Credit Union Locator Tool.