First-Time Car Buyer Loans: How to Get Approved and Save Money

Getting your first auto loan can be intimidating. As a first-time buyer, you probably don’t have an extensive credit history, and you may not be familiar with financing options. But don’t worry. There’s a first time for everything, and educating yourself on the financing process can help you get approved and save money.
In this guide, we’ll go over some of the challenges you might face when getting a first-time car buyer loan, how to overcome them, and strategies to secure better interest rates and lower monthly payments.
You can also use our handy auto loan calculator to calculate the early car loan payoff timeline that will get you the lowest overall costs.
Tips for First-Time Car Buyers
Budgeting To Determine Your Affordability
Choosing a new car that’s outside your budget will almost certainly hurt your chances of being approved. But even if you get the loan, you don’t want to wind up with a car payment you can’t afford. In most cases, you should try to keep your car payment under 10% of your monthly income.
A common first-time buyer mistake is only thinking about monthly payments and forgetting to factor in other car-related expenses when budgeting. Owning a car comes with many different expected and unexpected costs, from fuel and maintenance to insurance and emergency repairs.
Understanding Your Credit Score
Credit is a crucial indicator that lenders use to determine how risky you are as a borrower. If you’re like most first-time buyers, you have a relatively limited credit history, so your credit score is even more important.
There’s no industry-wide minimum credit score required to get an auto loan, but a score above 660 is usually considered good. A higher score can get you a lower interest rate, which is especially important because the typical interest rate on a car loan for a first-time buyer is higher than average.
Exploring Financing Options

As a first-time buyer, you have multiple financing options at your disposal, including:
- Traditional bank loans: Typically offer higher loan amounts but also higher interest rates
- Credit union loans: May come with lower interest rates, but options may be limited depending on location
- Dealership financing: Offer convenience and easier negotiations, but may come with hidden costs
Many lenders offer first-time buyer programs that come with less rigid eligibility requirements, lower interest rates, and more flexible down payment options. You should always shop around for lenders to find the best financing option.
The Preapproval Process
Going through loan preapproval before buying a car makes the experience less stressful because you know exactly what you can afford. You can usually choose to apply online or in person.
Either way, you’ll need to provide proof of income, employment, and residence to your lender and show them your driver’s license or other official ID. They’ll also run a soft credit check, which won’t hurt your score.
Once you’re preapproved, your lender will give you a written loan estimate, which should include the amount you’re approved for, an interest rate, the loan term, and your estimated monthly payments. Your preapproval will typically be valid for 30-60 days.
Improving Your Loan Eligibility
A lack of credit history can make getting approved more difficult, as lenders have to take on more risk. But there are ways to significantly improve your eligibility.
One good method is to save up for a bigger down payment. This allows you to take out a much smaller loan, which reduces risk for your lender. Paying a larger amount upfront also lowers the total amount of interest you’ll have to pay in the future.
Getting an auto loan for a first-time car buyer is also easier with a co-signer. If you have a friend or family member with good credit, they can co-sign with you. This means they’ll be legally responsible for your loan if you can’t pay it back.
Evaluating the Total Cost of Ownership
There’s more to consider than just monthly payments on your car loan for a first-time buyer. You’ll also need to buy car insurance and pay for ongoing maintenance and repairs.
Always remember that your car is a depreciating asset. It’s not like buying a house. When you own a home, you’re slowly building equity. It’s an investment, and its price is likely to go up over time.
When you buy a new car, its value drops the moment you drive it off the lot because it immediately becomes a used car, and that value will continue to depreciate over time. This is why it’s almost always a smarter financial decision to buy a reliable used car, and you should only ever buy a car you know you can afford.
Negotiating Loan Terms and Vehicle Price
One of the main reasons first-time car buyers end up overspending is that they don’t negotiate. Make sure you have all the information you need and be prepared to walk away if you aren’t getting a fair shake.
Getting preapproved and shopping around for lenders allows you to use the information you’ve gathered to negotiate lower interest rates, reduce your loan term, or even lower the purchase price.
You may also be able to renegotiate an existing loan. Your lender may give you the option to defer or refinance your loan, which can extend the length of your term and lower your monthly payment. For example, if you’ve recently started receiving supplemental security income (SSI), your lender may allow you to refinance your car loan on SSI because they include these benefits as income.
Get Approved for a Car Loan and Save Money With MoneyAtlas
Whether you’re shopping for car loans, starting a college fund, or planning for retirement, learning about money helps you make smart choices and build a good financial future for yourself and your loved ones.
You can get approved and save money with MoneyAtlas. We’re your resource for accurate, real-world financial information.
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