Financing Your First Car: Tips for Young Drivers

Want to get your first car? Let’s talk about how to pay for it. 

Car loans can be tough for young drivers as they are often perceived as less experienced drivers and may be considered more likely to make mistakes or not take full responsibility. This can sometimes affect how lenders view them as borrowers.

If this is your first loan, be sure you're ready for the commitment. Owning a car costs more than just the loan payments. You'll also need to pay for gas, insurance, and repairs. Before you get a car loan, think about all the costs. This guide will help you understand how to get approved for a car loan.

Key factors to get approved for a car loan as a young driver:

1. Be at least 18 years old

You have to be at least 18 years old to get a car loan. Even though you can drive before the age of 18, you need to be an adult to borrow money. 

You can definitely buy a car with cash or borrow money from family, but you won't be able to get a loan from a bank or financial institution until you're 18.

Read: What is the Minimum Requirement to Get a Car Loan in Canada?

2. Build a good credit score

Once you can borrow money, start building your credit score. A good credit history is important for young drivers who want a car loan. Lenders use your credit history to see if you're a good borrower.

Get a student or secured credit card. Use it wisely by making small purchases and paying it off every month. Pay your bills on time, including rent and utilities. Paying bills on time looks good on your credit report.

Read: 7 Benefits of Having a Good Credit Score

3. Get a co-signer

Cosigner car loans are another option. If you don't have enough money for a car, you can ask someone to guarantee the loan for you. This is common for people with bad or no credit. If you know someone with good credit, they can help you get a loan. They agree to pay the loan if you can't. They'll still need to qualify for the loan themselves. This is often a parent, but it could be anyone you trust.

4. Save for a down payment

A down payment can make a significant difference in your car loan application. The larger down payment, the smaller the loan amount you'll need to borrow, which can lead to lower monthly payments and a better interest rate.

Read: 5 Benefits of Making a Down Payment on Your Car Loan

5. Look for affordable insurance 

As a young driver, you can lower your car insurance costs by taking a driver education course, maintaining a clean driving record, increasing your deductible, bundling insurance policies, choosing a less expensive car, opting for a high-security vehicle, and shopping around for the best rates.

Read: How to Get Cheaper Car Insurance in Canada

Getting approved for a car loan as a young driver may require additional effort, but it's not impossible. By building your credit history, considering a cosigner, saving for a down payment, shopping around for the best deal, and providing the necessary documentation, you can increase your chances of securing the financing you need to drive off in your first car. Remember, patience and persistence are key to achieving your financial goals.