You Don’t Have to Have Credit to Buy a Car

Maybe you get along just fine without a credit card or you’re a student, or maybe you don’t like how credit issuers do business. In either case, you’d like to buy a car but know there’s a good chance you’ll be turned away because you don’t have a history of credit. Thankfully, not all hope is lost. Brush up on tips for getting a car with no credit.

Leave Your Assumptions at the Door

One of the most important things to bear in mind with this particular situation is that lenders have encountered creditless borrowers before, and they’ve worked out strategies for such circumstances. If you currently have a bank, you might want to start there since they already have an idea of how well you manage your money. Ask questions such as if the lender has done business with applicants who don’t have a score in the past and how they go about conducting business with them. Know that you’ll likely have to show you’re a low-risk borrower, which you can do by showing you pay bills on time, have money in savings and have a sizeable down payment to offer. Remember you don’t have to buy junk cars if you have bad credit, there are good options out there.

Pay Cash

If you don’t have credit but you do have the cash to pay for the car in full, you might not have many obstacles to overcome. When it comes to credit and financing, lenders just want to know the lender will be able to successfully pay the loan back. If there’s no loan to speak of, then there’s relatively little risk for lenders to worry about. One of the great things about paying for your car in cash is that you don’t have to worry about paying interest over time, nor do you have to worry about being upside down on your loan.

car loan

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Get a Cosigner

A friend or family member who has good credit and is willing to do you a favor could serve as a cosigner on your auto loan. Instead of using your non-existent credit score, lenders will instead use your cosigner’s to determine whether you’re approved for financing and how much you can expect to pay in interest. Know that your cosigner is taking a risk acting in this role, mainly because she or he will be responsible for your loan if you miss payments, which could tarnish her or his credit rating and report, so make sure you both know what you’re getting into before agreeing to anything.

Think About Leasing

Rather than buying a car, you might be better off leasing it instead. By leasing, you’ll be able to trade cars in two or three years if you want, which is something you could enjoy. One thing to bear in mind with leasing is that it can come with added fees not common to traditional auto financing, such as paying for any wear and tear done to the car and any extra miles you drive outside of the agreement’s mileage restrictions. Just as you would with financing, make sure you read the fine print and understand what you’re getting into before leasing.

Take Some Time to Build Your Credit

If you don’t have an immediate need for a car, you can take a few months to establish a credit score and file. Feel uneasy about this suggestion? You could encounter a financial emergency down the road that surpasses your current financial reserves, and having quick and easy access to a credit card could be the escape route and peace of mind you need. Explore your options for a credit card to find one that meets your needs, has a low-interest rate and has perks you feel are a good fit. You can use the card to buy a tank of gas and immediately pay it off before the end of the month. Your main goal here is to show you’re responsible with how you use your card and that you can make on-time payments, which is exactly what lenders want to see in applicants.

It might be more than a little difficult to buy a car without credit, but it doesn’t have to be impossible. Shop and move smart in the time leading up to buying a car and you’re sure to find an option as well as a car that suits you best.

 

Tom
 

Arnel Ariate is the webmaster of Money Soldiers.

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