What Interest Rate Will I Get as a First-Time Car Buyer?

The auto loan interest rate you get depends on your credit, your income, and your current debt more so than if you’re buying a car for the first time or not. That said, if you have a limited or poor credit history, applying with a co-signer may help you qualify for a lower rate.

What Is a Good Monthly Payment for a First Car?

A good monthly payment on a car really comes down to one that you can reasonably afford. Ideally, it should only be a small percentage of your monthly income (around 10% to 15%). Even if you qualify for a high loan amount, that doesn’t necessarily mean you should take the full amount.

Can You Finance a Car If You Have No Credit History?

There are some lenders that are more open to borrowers with no credit history than others. You will likely have to pay a higher APR than buyers with strong credit, or you can add a co-signer to help you.

Should You Buy New or Used for Your First Car Purchase?

Choosing a new or used car for your first vehicle purchase really depends on your finances and your driving needs. It is possible in some cases to find a new car that is more affordable than a slightly used vehicle, depending on the make, model and year. The best approach is to decide on your budget, how much monthly payment you can afford, and the type of car you prefer, and then do some shopping around.

Best Car Loans for First Time Buyers of 2024

If you’re ready to get your first car and aren’t able to pay for it in full with cash, you’re going to need to finance some or all of the purchase. With interest rates on the rise, shopping around for the best car loans for first time buyers can help you save a significant amount of money and keep the monthly cost affordable. We researched the top auto lenders to highlight those offering auto loans to first time car buyers who may have limited credit histories to help you find the best rates and terms possible.

Best Car Loans for First Time Buyers of 2024

Best for Most Borrowers: AUTOPAY
Best From a Big Bank: Chase Auto
Best for Military Members: Navy Federal
Best for Online Experience: Carvana
Best for Buying Used: CarMax

Want to see a broader selection of lenders? Take a look at the best auto loans overall to browse our recommended companies.

Best for Most Borrowers : AUTOPAY

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Key Specs

APR Range: 2.99% to maximum not disclosed
Loan Amounts: $2,500 to $100,000
Loan Terms: 24 to 96 months

Pros & Cons

Pros

No origination fee
Even those with poor credit can qualify
Pre-qualification uses a soft credit pull

Cons

May take longer to get funding than other lenders
Need to complete a full application to see rates
Pre-qualification is not instant

Why We Chose It

AUTOPAY is an auto loan marketplace, not a direct lender, which is why there are loan options for borrowers of all income and credit levels—including first-time car buyers. There are loans available for new cars and used cars, as well as lease buyouts and refinances.

The minimum APR of 2.99% is hard to beat—but probably also very hard to qualify for unless you have exceptional credit. Since very few details are disclosed by the company, you won’t really know the rate you are approved for until you process the application. There is, however, a good range of term options up to eight years, which can help keep payments affordable (although the interest will cost more over time). AUTOPAY has a fairly simple, straightforward process, but it’s not necessarily the fastest since it doesn’t promote same-day financing as some other auto lenders do. If you’re not in a big rush, it could be worth giving it a try since you’ll get to compare a few rates and terms to find the loan that’s best for you. Depending on which lender you go with, there could be discounts for setting up autopayments or other promotions as well.

Borrower Qualifications

Minimum credit score/range: 500
Minimum income: Depends on lender
Maximum DTI ratio: Depends on lender
Employment qualifications: Depends on lender
Autopay is available in all 50 states plus Washington D.C.

Vehicle Qualifications

Maximum loan-to-value ratio: Not disclosed
Maximum accepted mileage: 150,000
Maximum accepted age of vehicle: 10 years
Allows private-party vehicle purchases: Yes

Best From a Big Bank : Chase Auto

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Key Specs

APR Range: 6.44%–17.19%
Loan Amounts: $4,000 to $1,000,000
Loan Terms: 12 to 84 months

Pros & Cons

Pros

Fast approval in 2 to 3 hours
Rate discount for Chase Private Clients
Can get estimated rates with a calculator tool

Cons

No auto refinancing or private-party purchases
Car must be from a dealer in the Chase network

Why We Chose It

Chase Auto is a good pick if you are buying a new or used car through a dealer and want to go with a lender that has big bank recognition rather than a company you don’t know much about. You’ll have the opportunity to pre-qualify without a hard credit check (or having to get on the phone with someone who has a slick sales pitch). In fact, the entire application is done completely online. Also nice is that you’ll get an estimated rate with the bank’s online calculator, so you can decide if it’s worth moving forward. The catch is you’ll want to make sure that the dealerships you have in mind are part of Chase’s network. Otherwise, you won’t be able to use the financing. The good news is that it does have 12,000-plus partner locations. So if you’re not beholden to a particular dealership, you’ll likely find one in your area. Chase doesn’t disclose much as far as credit or income requirements (although its rate calculator starts at “fair” credit, which is a 580 score minimum). However, Chase does allow co-signers in case you need a little help getting approved. If you happen to be a Chase Private Client, you’ll also score a 0.25% rate discount.

Borrower Qualifications

Minimum credit score/range: Not disclosed
Minimum income: Not disclosed
Maximum DTI ratio: Not disclosed
Employment qualifications: Not disclosed
Chase Auto offers loans to drivers in all 50 states plus Washington D.C.

Vehicle Qualifications

Maximum loan-to-value ratio: 140%
Maximum accepted mileage: 120,000
Maximum accepted age of vehicle: 10 years
Allows private-party vehicle purchases: No

Customer Reviews*

“My overall experience has been good. I don't really have anything else to compare to, because this is the first loan I got. I didn't actually go looking for it. My old car broke down, so I needed a new one, and instead of renting one, I thought I'd just buy one…. So I went to a dealer. and Chase was just sort of what they gave me. I didn't really go through other options. So there really wasn't that much of an issue. It was just easy. It was easy, mostly because it was through the dealer.”
“[Managing my loan] is pretty easy since it's just on autopay right now on Chase itself. I also use Chase as my main bank, so it's easy. It's on the app. I can see it under loans and lines of credit right there. And it's on autopay. So I don't really think about it. It's really easy.”

*Customer reviews were collected from an independent Investopedia survey of 1,016 current, past, and prospective auto loan borrowers.

Best for Military Members : Navy Federal

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Key Specs

APR Range: 4.54%–7.84%
Loan Amounts: $250 minimum; maximum not disclosed
Loan Terms: 36 to 96 months

Pros & Cons

Pros

Decision within minutes in most cases
Low rate range compared to other lenders
Pre-qualification is available

Cons

Must be a Navy Federal Credit Union member
Lowest rate is only for 36-month new car loans
No loans for lease payoff

Why We Chose It

If you’re a member of the military, a veteran, or meet other qualifications for membership with Navy Federal, getting an auto loan there for a new or used vehicle, or to refinance your current auto loan, could be worthwhile. Unfortunately, not all will be able to qualify for membership. But if you do, not only does Navy Federal offer very competitive rates, but there are discounts for active duty and retired military members. You can start off by pre-qualifying to see what you may be eligible for. From there, once you apply, loan decisions are made almost instantly in most cases, but it may take a few days for the funds to be disbursed. You can also take advantage of the tools offered by Navy Federal, including its Car Buying Center where you can browse vehicles, get up to two free CARFAX reports, and access other partner perks for drivers.

Borrower Qualifications

Minimum credit score/range: Not disclosed
Minimum income: Not disclosed
Maximum DTI ratio: Not disclosed
Employment qualifications: Not disclosed
Navy Federal services auto loans in all 50 states and D.C.

Vehicle Qualifications

Maximum loan-to-value ratio: 125
Maximum accepted mileage: None specified
Maximum accepted age of vehicle: None specified
Allows private-party vehicle purchases: No

Best for Online Experience : Carvana

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Key Specs

APR Range: 6.85%–16.46%
Loan Amounts: Not disclosed
Loan Terms: 36 to 72 months

Pros & Cons

Pros

Open to those with poor credit
No haggling with dealership
Shop for and finance car on one platform

Cons

Financing is only for Carvana purchases
APR may be higher than some competitors
Down payment is usually required

Why We Chose It

If you’re thinking of purchasing a car using a completely online experience with no salespeople involved, Carvana is the leading platform to do so—and 80% of its customers use Carvana financing.

If you do move forward with Carvana’s financing, interest rates could be higher than competitors, especially if your credit is less than stellar. You can add a co-signer to your loan to help qualify for a better rate, and enrolling in autopay can reduce your monthly payment as well as your interest rate.

Borrower Qualifications

Minimum credit score/range: 500
Minimum income: $4,000 per year
Maximum DTI ratio: Not disclosed
Employment qualifications: Not disclosed
Carvana operates in 48 states (not Hawaii or Alaska)

Vehicle Qualifications

Maximum loan-to-value ratio: Not disclosed
Maximum accepted mileage: 140,000
Maximum accepted age of vehicle: Varies
Allows private-party vehicle purchases: No (only for cars bought through the Carvana platform)

Best for Buying Used : CarMax

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Key Specs

APR Range: Not disclosed
Loan Amounts: $5,000 to $100,000
Loan Terms: 36 to 72 months

Pros & Cons

Pros

No-haggle financing for used car purchases
Pre-qualify without credit impact
Co-buyers allowed

Cons

Financing only for CarMax vehicles
No new cars, just used
Only available in 41 states

Why We Chose It

If you’re in the market for a used vehicle, you can avoid the “used car salesman” altogether by shopping and getting your financing through CarMax. CarMax offers the best used car loans for first time buyers through its own lending as well as from other partners to accommodate borrowers no matter how limited or low their credit score is. The site’s pre-qualifying tool will give you an idea of your rate, and you can decide at that point if you want to bring on a co-signer.

Depending on where you live, CarMax may not be available as it only operates in 41 states; and you must be within a 60-mile radius of a CarMax location in order to have a used vehicle delivered. If you do have one in your area, though, it’s worth checking out if you are interested in buying a used car.

Borrower Qualifications

Minimum credit score/range: 500
Minimum income: Not disclosed
Maximum DTI ratio: Not disclosed
Employment qualifications: Not disclosed

Vehicle Qualifications

Maximum loan-to-value ratio: Not disclosed
Maximum accepted mileage: Not disclosed
Maximum accepted age of vehicle: Not disclosed
Allows private-party vehicle purchases: No

Customer Reviews*

“I've been satisfied with the products that I've gotten there. I've bought, and my family has bought more than one car from them, and I've got friends who have, so I think it's pretty well-run. And I've been happy with the warranties on the repairs two cars ago.”
“...Over the years I started buying from CarMax, maybe about 15 years ago, and had used the same salesman, usually. But this time it was during COVID when I got the car and they were trying to do everything that they could online. They would have even brought the car to me. If I picked it online they would have driven it to me and had me fill [out] the paperwork in my house. But because I was in a different state, they didn't do that.”
“If I was going to do something differently, I'd probably check and see if [my] credit union had lower interest rates. … But that's the only thing I would do differently, is … go for something with a lower interest rate.”

*Customer reviews were collected from an independent Investopedia survey of 1,016 current, past, and prospective auto loan borrowers.

Final Verdict

Autopay is a strong choice for a car loan since it’s accessible to most borrowers, including first-time buyers who may have limited or just OK credit. If you’d rather go with a traditional bank, Chase Auto is a solid option, although military members or veterans can probably score the best deal through Navy Federal.

If you prefer to ditch the dealership and use one of the big online car shopping platforms—Carvana or CarMax (for used cars)—they’ve got decent financing for first time buyers, too.

Compare the Best Car Loans for First-Time Buyers

APR Range	Loan Amounts	Loan Terms
2.99% and up	$2,500 to $100,000	24 to 96 months
6.44%–17.19%	$4,000 to $1,000,000	12 to 84 months
4.54%–7.84%	$250 to undisclosed	36 to 96 months
6.85%–16.46%	Not disclosed	36 to 72 months
Not disclosed	$5,000 to $100,00	36 to 72 months

Guide to Choosing a Car Loan for First-Time Buyers

Where to Find First-Time Buyer Loans

First-time car buyers can secure an auto loan from a number of places including online lenders, traditional banks or credit unions, or loan marketplaces, as well as through the car dealerships themselves. It’s always a good idea to shop around and get two to three quotes so that you can make sure you’re getting the most favorable terms and interest rate possible.

When using a co-signer, be aware that their credit is on the line, too, if you miss a payment. Be sure you both understand the fine print when you sign the promissory note, and do your best to protect their finances—and your relationship—by consistently paying on time.

Factors to Consider When Choosing a Car Loan

When comparing auto loans, some of the key factors to consider include:

APR: The annual percentage rate has the most impact on your monthly payment and what the loan will ultimately cost you.
Fees: Some lenders charge application or origination fees, so be sure to include those in your cost comparisons
Credit requirements: You’ll want to make sure you’ll actually qualify for the loan. Many auto loan lenders have options for first-time buyers, but you may pay a higher interest rate.

Vehicle requirements: If you’re buying used especially, some lenders have a maximum mileage or age of car limit.
Loan use restrictions: Some auto loans cannot be used for private party sales while others can.

When you shop around for auto loan rates, try to apply to different lenders within a short time frame (say within two weeks) to lessen the impact on your credit score. That’s because most credit scoring models will recognize that you're comparing rates and only count it as one hard inquiry rather than multiple.

How First-Time Buyer Programs Work

If you’re trying to qualify for an auto loan as a first-time buyer, you’ll need to get familiar with how lending works. Typically, a lender will evaluate your credit status, your income, and other debt obligations to determine if you meet requirements. You may or may not need a co-signer with strong credentials to help you get approved, or qualify you for more favorable terms. If available, you can do a pre-qualification, which lets you know what you’ll likely qualify for without doing a hard credit pull. If you’re happy with the result, you can go ahead and complete an application, which will generate a full credit check. You may get a decision within a few minutes or a couple of days, depending on the lender, followed by the disbursement, which can be a check or electronic deposit.

If you are in the military, a first responder, or a teacher, always ask if there are any special programs when shopping around for loan products. Some banks and credit unions offer rate discounts and other perks for such affiliations.

Frequently Asked Questions

What Interest Rate Will I Get as a First-Time Car Buyer?

The auto loan interest rate you get depends on your credit, your income, and your current debt more so than if you’re buying a car for the first time or not. That said, if you have a limited or poor credit history, applying with a co-signer may help you qualify for a lower rate.
What Is a Good Monthly Payment for a First Car?

A good monthly payment on a car really comes down to one that you can reasonably afford. Ideally, it should only be a small percentage of your monthly income (around 10% to 15%). Even if you qualify for a high loan amount, that doesn’t necessarily mean you should take the full amount.
Can You Finance a Car If You Have No Credit History?

There are some lenders that are more open to borrowers with no credit history than others. You will likely have to pay a higher APR than buyers with strong credit, or you can add a co-signer to help you.
Should You Buy New or Used for Your First Car Purchase?

Choosing a new or used car for your first vehicle purchase really depends on your finances and your driving needs. It is possible in some cases to find a new car that is more affordable than a slightly used vehicle, depending on the make, model and year. The best approach is to decide on your budget, how much monthly payment you can afford, and the type of car you prefer, and then do some shopping around.

Other Types of Auto Loans

Methodology

Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate auto loan providers, we collected hundreds of data points across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements. We also surveyed and interviewed borrowers about their experience for first-hand insights.