How Old Do You Have to Be to Get a Car Loan?

For many teenagers, getting a driver’s license is a rite of passage. But even with a driver’s license in hand, it can be difficult for young drivers to get a car loan.

In most cases, you must be at least 18 years old to borrow money from a lender. There are ways for teenagers to finance a vehicle, but it usually requires a parent or guardian to take out a loan and put the vehicle in their name.

How Old Do You Have to Be to Buy a Car?

In almost every state, you have to be at least 18 years old to get an auto loan. Because a loan is a legally binding contract, auto lenders can’t hold minors legally responsible for the terms of a contract until they reach the age of majority, which is 18 years old in nearly every state.

Because of this statute, few lenders will issue a car loan to a minor. Those few that do will likely require a co-signer, like a parent or a guardian who is over 18. Many banks also want borrowers to have an established credit history, which most teens don’t have unless a parent adds them as an authorized user on one of their accounts.

Is There an Age Requirement to Buy a Car with Cash?

Because most drivers under 18 can’t get an auto loan, the only other alternative is to purchase a car in cash. However, young drivers who want to buy a car with cash might run into some obstacles.

If a minor wants to pay cash for a vehicle, most states still won’t allow them to have a car titled in their name. Texas is one of the only exceptions. As a result, an adult may have to register the vehicle in their name.

Check with your state’s motor vehicle department to learn about the specific laws that apply to a minor purchasing a vehicle. Even if you are able to bypass your state’s titling laws and pay cash, you still need car insurance to drive legally. Thus, adult assistance is required either way.

Can a Teen Buy Car Insurance?

Car insurance is a legal requirement in almost every state. Regardless of your age, all vehicles must be insured. However, an insurance policy is another type of legal contract. That means a driver under 18 may not be able to purchase their own coverage from an insurance company.

Of course, parents can add their children to their car insurance policy, which is the easiest way for minors to get coverage. If the child has their own car, a parent can also add the vehicle to their existing insurance policy.

When a teen driver moves away from home, however, they are typically responsible for getting their own car insurance policy. And because young drivers are risky to insure, it can be very difficult to find affordable rates.

How Can a Teenager Legally Get a Car?

If you have a teen driver at home, there may be a way for them to get a car. The most common way is to take out a loan in your name as their parent or guardian. Once you pay it off, you’ll be the vehicle’s legal owner. That’s the ideal time to transfer the title into your child’s name. However, you still have to wait for them to turn 18.

There are lots of ways to get an auto loan, including through a car dealership, bank, or credit union. To get approved, you must meet certain requirements. Here are some of the eligibility factors that lenders typically look at when you apply for an auto loan:

Credit Score

Your credit history helps determine if you will be a responsible borrower. Your credit is also used to calculate your interest rate, which impacts how much you will pay over the life of the loan. Contact the credit bureaus several months before applying so you know your score and what type of interest rates you can expect.

Income

Banks also want to ensure you have the money to make your monthly payments. Be prepared to provide proof of income, whether it’s from a traditional job or a contract position. Recent pay stubs or bank statements should satisfy this lender requirement.

Driver’s License

Have your driver’s license on hand when you submit your loan documents. A passport will also work if you don’t have another government-issued photo ID.

Proof of Residency

Borrowers should also be prepared to provide proof of residency. You can give your bank a copy of your lease, mortgage statement, or utility bill with your loan application.

Finance & Insurance Editor

Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.