First Time Auto Loans

Get the Best Approvals
for Buying Your First Car

First time auto loans can be a bit tricky to get approved for if you are trying to find financing on your own and/or if you are working with a car dealership that does not specialize in these types of loans.

If you are a first time car buyer it's important to note that getting approved for an auto loan can be more difficult than getting approved for a home loan.

The frustrating part is if you're looking in the wrong places for approvals and it's resulting in turn down after turn down...Very discouraging, but...

Don't despair...There is hope!

If you are a first time car buyer, which you will most likely be unless you've paid cash for your previous car(s), there are some things that you'll want to know to expect and some things you'll want to watch for.

What you'll find below:

Buying Your First Car? We Can Help!
Loans for Buying Your First Car - Auto Credit Express�

Keep In Mind...
Before we get started here I'd like to ask that you please keep in mind that there are auto lenders out there that approve absolutely all types of credit.

Whether it's first time auto loans or some other no credit / bad credit loan you are looking for these lenders are out there and they're eagerly awaiting to loan you money.

I say this, because I will mention below that some situations below are tougher than others, but remember that they are certainly not impossible.

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Four Levels of A
First Time Car Buyers Credit

I've found that first time car buyers will usually fall within one of the following four credit levels:

1. A Ghost

No. This doesn't meant that your credit is scary, but it means that you have an absolutely blank credit file.

There are no good accounts reporting and no bad accounts reporting, there is simply nothing. This is the type of credit most people think of for first time auto loans.

If you are in this credit situation you'll find that most prime lenders will not be interested in loaning to you right out the gate.

You'll need to prove to these lenders over time that your intentions are good and that you pay your bills on time.

It is sometimes possible to have a credit union approve you in this credit situation and your finance rate will typically fall in the middle of the road...12-15%.oac

To get approved with a credit union, they are usually going to want to see:

  • Good job time, like 18 months or better.
  • Decent down payment $2,000 or more.
  • Smaller loan $6,000 to $10,000.
  • Shorter finance term, like 48 months or less with a 60 month maximum.

2. A Ghost With Derog

Derog is short for derogatory. In this case it means derogatory credit and is reflected on your credit file as collection accounts and/or account chargeoffs.

This is not a great situation to be in and most people I've seen in this credit situation don't even realize that they have negative accounts reporting. This is the most difficult of situations to be in when applying for first time auto loans.

Do yourself a favor before you begin applying for your auto loan and check your credit for inaccuracies and/or legitimate collections that you may want to pay off. This will save you from unnecessary credit inquiries and potentially unnecessary turn downs.

Oftentimes the collections are from:

  • Medical collections
  • Cell phone companies
  • Utility companies
  • Court judgments
  • Tax liens, etc.

They are not usually from companies that you have applied for credit from like credit cards, auto loans, etc. and this is why you may not even know they exist.

It is well worth it to clean these items up before applying for credit and I'd suggest reading my Collection Removal article before you do.

If you don't want to clean these up, or don't have the time to wait for these to get cleaned up, that of course is OK and you can still get approved, but it may limit your options.

This means you may have to put more money down, buy less car and/or pay a higher finance charge.

3. Limited Credit, No Installment Loans

This is not a terrible spot to be in and certainly helps with getting you approved through a local credit union for your first time auto loans.

You may have a couple of small credit cards that you've had for 6-18 months and may even have some very small medical collections, etc.

Credit unions will still look for things like:

  • Good job time, like 18 months or better.
  • Decent down payment $1,000 to $2,000 or more.
  • Smaller loan $8,000 to $12,000.
  • Shorter finance term, like 60 months or less with a 72 month maximum.

Even though they are looking for similar things as a "Ghost" your chances for approval are much greater.

4. Long History, But All Revolving

I typically see this credit situation with customers from 50 years young and up. These are typically the easiest first time auto loans to get approved.

Usually, any auto loan credit they have had was over seven years ago and the loan company has stopped reporting to the credit bureaus, or they have always paid cash for their cars.

So even though you may be in this category and have financed cars before, it's been so long that you are no longer receiving credit for these loans and you would be considered a first time car buyer.

This actually reminds me of a couple I met with recently that were in their 70's and had a very long credit history, but it was all credit cards.

Their credit scores were excellent and in the upper 700's, but I had received multiple turn downs from my prime lenders due to a lack of installment credit (auto loans, mortgage).

I was eventually able to get them approved, at a prime rate, with a local credit union, but this just goes to show that credit score isn't everything and credit depth plays an important role.

Check your Credit Score - Fast, Free & Easy at

Will You Need A Co-Signer
When Buying Your First Car?

Simple answer...No!

More complicated answer...It helps.

Co-signers are not necessary to get approved for first time auto loans. The only time they may be is if you are:

  • Trying to lower payments and need a better interest rate.
  • Trying to lower payments and need a longer term loan.
  • Trying to buy more car than a lender will approve a first time car buyer for.
  • The loan you are trying for exceeds the value of the car you are trying to buy rather substantially.

There may be other circumstances that apply, but these seem to be the most common.

If you have a well qualified co-signer, Great! It will help to give you more options.

If you don't have a co-signer, don't worry, you can still get approved, but you may have to be willing to settle for a little less car than you may want and your terms for the loan will be, more than likely, less favorable.

Will You Need Down Payment
When Buying Your First Car?

Simple answer...No!

More complicated answer...It helps.

It's like deja vu if you just read the co signer section above. By saying no to the down payment question, I do not mean that any and all customers applying for first time auto loans will be approved no money down.

I am simply saying that I have been able to get many approvals for first time car buyers with no money down and it is not always required.

Although money down may not be a requirement, it will benefit you in very similar ways to having a co signer.

If you can put money down, and the more the better, it may help to improve:

  • Your interest rate.
  • The type of car you can buy.
  • Your equity position.

When referring to down payment, one thing to keep in mind is that down payment does not always have to be in the form of cash. Trade in equity is often times acceptable for down payment.

Even if your trade is an old "beater," it can usually be used to substitute for cash down payment.

In fact, the top lender that I use for first time auto loans only requires a minimum of $500 down and that can come in the form of cash and/or trade equity.

Three Sources To Apply
For First Time Auto Loans

There are dealerships across the country that have special finance departments that cater to customers with bad credit, no credit, bankruptcies, foreclosure and of course, first time auto loans...They can help! You just have to know where to find them.

Option #1 - Funding Way

Funding Way is a division of Auto Credit Express and has processed over 1 Million online auto loans. In addition, they've closed over 1 Billion dollars in online loans between both the US and Canada.

Simply fill out this quick 60 second application Apply for an Auto Loan Online - First Time Car Buyer, Okay!

Option #2 - Buy Here Pay Here

A "Buy Here Pay Here" dealer with both sell cars and will finance your loan in house. It's rare that anyone is turned down at a buy here pay here as long as you have a solid down payment.

The downside to buy here pay here dealers is that they will usually want big down payments, short terms (means higher payment), have really high rates and sell older cars with higher mileage.

Option #3 - A Local Credit Union

As mentioned a few times above your local credit union can be a great source for first time auto loans. It's important to keep in mind that many credit unions do not have first time car buyer programs and if they do, they will oftentimes require a qualified co-signer.

Even if they do not require a cosigner, they will more than likely look for:

  • Steady employment. (18 months or more)
  • Decent income. ($2,000 mo. or better)
  • Small loan. ($6,000 possibly up to $12,000)
  • Short term. (48 months is preferred)

Unfortunately, due to our current economic environment, even credit unions have tightened up quite a bit and first time auto loans have become more and more difficult to get approved for, but hey it's worth a shot.

My Summary for
First Time Auto Loans

First time auto loans are not as difficult to get approved for as you may think. In fact, there are lenders eagerly awaiting to approve you.

The most important thing to keep in mind is that first time auto loans are a specialized type of auto loan and not all lenders and/or car dealerships will offer them.

By the way, the larger the dealership doesn't always translate into a better chance for approval.

Larger dealerships don't always consider first time auto loans to be a big priority to their bottom line and may not even try to help you without big money down and/or a co signer.

Of course, if possible, arrange to have a well qualified co signer help you when buying your first car, because as mentioned previously this can help to get you a better approval.

In addition, if you can save up some money and are prepared to put a fair amount down this will help your approval as well.

Even though both of those are beneficial they are not necessary.

If you're planning to go it alone when buying your first car just keep in mind that it is all about finding the right lenders and that the sky is not going to be the limit when you're first starting out.

When applying for first time auto loans and buying your first car, it's beneficial to start small, pay well, build up some credit history and I promise the next time around will be much easier.

Apply now and you could be on the road in less than 24 hours -> 60 Second Auto Loan Application

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