You can’t legally enter into a contract in the US until you reach the age of 18, which makes it impossible to finance a car on your own when you become a legal driver at 16.
Getting on the Road… without a Car in Your Name
Just because you can’t finance a car by yourself at 16 doesn’t mean you can’t drive one. It just means you’ll have to find another way to finance one on your own. The most common way is having your parents buy a car for you with you making the loan payments although you can’t be on a loan with them until you’re 18. Also, only your parents will be listed on the title, so you’ll have to be okay with not having ownership.
At 18, your parents should be able to refinance the car and add you as a cosigner now that you’ve reached legal age. Once you’ve had some time as a cosigner under your belt, and if you’ve been taking the steps to ensure you meet all the loan requirements, you may be able to refinance the vehicle in the future to remove your parent(s) from the loan.
In the Meantime
Like it or not, the law makes it impossible for you to finance a car on your own, but don’t let that get you down. In the meantime, work on building and maintaining a solid credit history. A thin credit file makes financing difficult, so building your credit now will help you get closer to getting financing on your own later.
The best way to build credit at a young age is to become an authorized user on a parent or guardian’s credit card. When you do this, you could be issued a credit card in your name, which you can use, but aren’t legally responsible for paying. Since your aim is to build credit, responsible use and coming up with a payment plan with the primary cardholder is a great idea.
It also helps if the person you’re pairing with has had the credit card account for a while, regularly uses the card, keeps their credit utilization low, and pays their bill. The key to making sure this all helps you is making sure that the credit card company reports authorized users to the credit bureaus. Without the three national bureaus – TransUnion, Equifax, and Experian – reporting your authorized credit status, your thin credit file won’t bulk up.
Just because you can’t finance a car on your own now, at 16, doesn’t mean much in the grand scheme of things. Enjoy the few years you have left of not being legally responsible, and do everything you can to ensure you start off on the right foot, credit-wise, when you turn 18.
Even if you do begin to build credit history now by becoming an authorized user, chances are your credit file will still be thin when you reach adulthood. This means you’ll most likely need to find a cosigner or special finance dealer if you plan on financing a car in your name at 18.
Here at Auto Credit Express, we can help with that. So, when the time comes, just fill out our online auto loan request form, and we’ll get to work matching you with a local dealer that has the lending resources you’ll need to get financing.