Tips, Tricks & Trends

Do You Need Money to Buy A Car?

You need money for just about everything nowadays. You need money to buy food, gas, and pretty much everything else that you need in your daily life. But do you really need money to buy a car?

Unfortunately, cars are not free

As much we would all love to walk into a dealership and demand that we get a car for free, we can’t. Fortunately, your creditworthiness helps you circumvent the need for money – at least in the short term – and with a good enough credit score, you really can walk into a dealership, test drive a car, sign some paperwork, and then drive home in a brand new car. Most financial experts will tell you that it’s not the best way to go about buying a car, but if you’re strapped for cash, then here are ways to buy a car without having to put any kind of down payment.

Toyota SUVs for sale at a dealership
A row of Toyota RAV4s are displayed on the sales lot at a Toyota dealership | Justin Sullivan/Getty Images

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Work on your credit score

The first step to being able to buy a car with just your signature is to build up your creditworthiness. After all, a bank isn’t going to give you a loan to cover 100 percent of the vehicle’s cost if they don’t think you can pay it back. So, it’s a good idea to get all of your financial ducks in a row.

When it comes to approving you for a loan, a lender isn’t only looking at your credit score and history, but they are also checking to see if you have an income and are responsible for all of your payments. You don’t need to make $100,000 a year, but they do need to see that you can support a monthly car payment with your current income stream. And no, you don’t need a perfect credit score to put no money down either, but you ideally would want a score around 680 or higher, according to Investopedia.

credit karma
BRAZIL – 2020/06/10: In this photo illustration a businessman holds his smartphone showing a graph with the credit score. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

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And as far as the payment history goes, you’ll want to make sure that all your payments to your credit cards are on time and that your total is at around 25 to 30 percent of your total credit limit. The lenders know that you’re not perfect, and they don’t expect you to be, but you do need to show that you’re financially responsible enough to handle a whole auto loan.

Consider getting a cosigner

If your income or credit history is kind of spotty, then another route that you can take is to get someone to co-sign with you for the car. If you have a really nice family or friend that has really good credit, then they can sign the contract with you, which can get you out of paying a down payment and even lower the interest rate on the loan.

However, that also means that if you miss payments or default on the loan altogether, not only will it affect your credit score, but it will affect theirs too. In turn, your co-signer could feel like they have a right to the car even though you’re the one mainly driving it. If you do find a co-signer to buy the car with you, then be sure to make the payments on time and keep a record of them to avoid any possible issues later on.

Shop for a loan

If your creditworthiness is in fact good enough to cover a 100-percent auto loan, then be sure to shop around first. You can check out your local banks and credit unions to see what kind of interest rates they have before stepping foot into a dealership. It’s a good idea to get familiar with the auto loan rates that are available to you so that you don’t have to go with whatever the dealership offers you since the rate that they give you will most likely be marked up anyway.

financing rates at a dealership
USA/IDAHO STATE/ LEWISTON _ 2.9% for 60 months on Toyota certified used Vehicles loan advertisment at Roger Toyota car dealer 22 Nov. 2011 (PHOTO BY FRANCIS JOSEPH DEAN / DEAN PICTURES) (Photo by Francis Dean/Corbis via Getty Images)

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It is possible to buy a car with no money

Ultimately, it is technically possible to buy a car with no money as long as you have the credit history and income to support covering the entire purchase on a loan. However, if you don’t have a strong credit standing and you can’t find a co-signer, then you always put a down payment on the car. A good rule of thumb would be a 10-percent down payment, but the more the merrier.