Just Turned 18? Here’s How to Buy a Car Without Any Credit History

Buying your first car at 18 is an exciting occasion – especially in Los Angeles, where it is hard to get around without wheels. That said, it can be challenging if you don’t have any credit. Loan lenders typically use credit scores to determine eligibility, and without any credit, you might face higher interest rates or even loan denials. 

At Hawthorne Auto Square, we’ll walk you through how to buy a car with no credit history, improve your chances of approval, offer tips on securing the best deal, and get you behind the wheel.

Can You Buy a Car at 18 Without Credit?

The simple answer is yes. You can buy a car if you are an 18-year-old first-time buyer with no credit, but it requires careful planning. You need to understand how credit and financing work to help you make better decisions.

Understanding credit and car financing

Credit history is a record of your past borrowing and repayment behaviors. It helps lenders evaluate your reliability in repaying debts. Without a credit history, lenders don’t have enough data to predict whether you’ll make timely payments. Lenders consider factors beyond credit history, such as:

• Income and employment stability. 
• Down payment amount. 
• Debt-to-income ratio.
• Having a co-signer.

The difference between good credit, no credit, and bad credit

Good credit means a strong history of timely payments, making it easier to get low-interest loans. No credit means no borrowing history, while bad credit involves missed payments and higher interest rates. You can still buy a car with bad credit, and you can check your credit report for free through Equifax, Experian, and TransUnion. 

Is it possible to get a car loan at 18 without credit? 

Yes, buying a car at 18 with no credit is possible, but expect challenges like higher interest rates, limited loan options, and stricter income requirements. Making a down payment of 20% or more can reduce the loan amount and increase your chances of approval.

Even without a credit history, you can demonstrate financial responsibility through:

• Proof of steady income.
• History of paying bills (rent, utilities, phone).
• A strong savings account balance.

Alternative ways to secure a car loan

• Credit unions: Offer better loan terms and work with first-time buyers.
• Rent-to-own or lease-to-own: Allow payments toward ownership but may cost more.
• Secured loans: The car serves as collateral but risks repossession if payments are missed.

Steps to Buying a Car With No Credit History

After reading this step-by-step list, you will no longer have to think about questions like “can I get a car loan with no credit?” or Google “how to finance a car with no credit?” This list is also full of car buying tips for young adults. 

Step 1: Set a Realistic Budget 

A general rule is to spend no more than 15-20% of your annual income on a car. As a first time buyer, you may want to spend a little less unless you have guaranteed job security. If you’re financing, keep monthly payments under 10-15% of your monthly income.

Step 2: Save for a Down Payment 

Aim for at least 10-20% of the car’s asking price. The easiest way to do this is to set up a savings account and set a goal amount. Make sure to have a percentage of each check automatically deposited into that account, and do not touch it until the goal is reached.

Step 3: Explore Financing Options

While we are happy to help you get started, it’s always a good idea to explore all your financing options before signing anything.

• Banks: Stricter requirements but lower rates.
• Credit unions: More lenient with better rates.
• Dealership financing: Convenient but may have higher interest rates.

Step 4: Consider Getting a Co-Signer

 A co-signer, such as a parent, relative, or friend, increases approval odds and lowers interest rates. However, a co-signer takes on financial responsibility if you miss payments, and their credit history is also affected negatively. Make sure your co-signer has the ability to make payments before they sign on.

Step 5: Look for First-Time Buyer Programs

Many lenders and manufacturers offer first-time buyer programs for those with little or no credit history. You will likely see a higher interest rate than with an established credit, but without a co-signer or credit history, these programs may be your best shot at financing or buying your first car.

Step 6: Explore No-Credit and Alternative Financing

Banks aren’t the only financing option available. Look into these no-credit options to see if you can find a good fit for your needs.

• Buy Here, Pay Here (BHPH) dealerships offer no-credit-check loans but charge high interest rates.
• Traditional car loans are better for long-term savings.
• Private sellers allow cash purchases with no financing, but these deals come with many drawbacks.

Step 7: Get Pre-Approved 

Pre-approval helps secure better financing and negotiating power. Start with credit unions, banks, or online lenders offering first-time buyer programs. Required documents include proof of income, identity, and residence.

Choosing the Right Car

Now for the fun part – choosing the right car. Luckily, Hawthorne Auto has done the work for you and made a top 7 list of the most affordable commuter cars, like the 2024 Hyundai Elantra. We also make it easy to shop around with our frequently updated car listings and sell your car.

There are a couple of factors to consider when weighing between new vs used cars:

• New cars: More expensive but come with warranties.
• Used cars: More affordable but may require more maintenance and repairs.
• Certified Pre-Owned (CPO): Used vehicles with warranties and inspections.

Negotiating the Best Deal

Use resources like Kelley Blue Book to research fair prices, offer 10-15% below asking, and negotiate. Review the contract before signing to avoid unnecessary hidden fees, like a dealer cleaning fee.

Building Credit While Owning a Car 

Financing a car helps establish credit. Payment history makes up 35% of your credit score, so set up auto-payments to avoid missed payments.

Other Ways to Build Credit:

• Get a secured credit card.
• Become an authorized user on someone else’s account.
• Use a credit-builder loan.

Call Hawthorne Auto To Get Help Purchasing Your First Car

By following these steps, you have just learned how to get an auto loan with no credit history. Hawthorn Auto is the trusted choice for first time buyers and repeat customers alike. We’ve been servicing the Watts area for 25 years, offering pre-approval and in-house financing programs, and a wide selection of used vehicles. Contact us today to learn more.