The excitement of turning 16 is often fueled by your ability to obtain a driver's license. Once you accomplish this motivating task, a desire to put your skills to the test and obtain a car is sure to follow. 16-year-olds, however, are ineligible for auto loans. In order to purchase a car, you must find creative ways to finance your vehicle.
Car Financing for Teens
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One easy way to purchase a car as a 16-year-old is to create a note between yourself and a family member. In fact, Cars Direct reports that parents who are ready for an upgrade can sell their current vehicle to their child. In exchange for making monthly payments toward a purchase price, the seller (family member) offers you the car. This concept is similar to getting a loan from a bank for your car and making monthly payments.
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The difference is that credit, debt-to-income ratios and down payments are not factors in determining your approval. As long as you have a job, the family member or friend selling you the car can determine – based on your character – whether to create a note for a car. You can negotiate the amount of your monthly payments and the length of time you want to pay off the car.
Private Car Sales
Finding a car in the classified ads is a great way to buy an inexpensive car. Teens who save up to purchase cars commonly buy from private sellers. Buying the car outright requires little paperwork, similar to creating a note with a family member. Request a Carfax report to determine the condition of the car before handing over your savings. An adult experienced in buying cars from private owners can be an invaluable resource during your transaction.
Vehicle Loan Exceptions
Auto loans are not impossible to attain, if your parents are willing to co-sign on a loan. Your parents need good credit, stable income, employment and a down payment to obtain a car loan. Once the car is purchased, your parents are considered the legal owners of the car.
Even though you are not the official owner, you do have a right to operate the vehicle. Many auto lenders require buyers to have insurance coverage prior to approval. You may be able to obtain a policy in your name, but the cost of insurance for drivers under 25 costs more than for older drivers.
How to Get a Title
Generally, if you are under the age of 18, you are not able to enter legal contracts. Even after you purchase your car, your parents may be required to co-sign on the title. There are exceptions to this rule, since laws surrounding car ownership are state-mandated.
To be safe, contact your Department of Motor Vehicles to determine the best way to obtain the title to the car you purchase, as well as register the vehicle. Many states consider any property of a minor to be the legal property of his parents until he turns 18.