Car Loans for College Students

College is about the freedom to have new experiences. Having access to a car can help you take advantage, and for some students, it’s a necessity to get to class. But what if you don’t have a car?  

Unless you can rely on public transportation, borrow a car, or pay cash in full, you’ll need to take out an auto loan to purchase a vehicle. That often requires good credit and income—both in short supply for most college students. 

If you approach it right, it’s possible to find car loans for college students—we’ll show you how.

How do car loans work?

Car loans are a type of installment loan, meaning you’ll make monthly payments until you’ve repaid the loan in full. Each month, your car loan payment is split up, with some going to your lender in the form of interest and some going to pay down the balance of your loan (aka a principal payment). 

Over time, you’ll make a bigger dent in your loan balance thanks to a process called amortization. Your monthly interest payment is based on your outstanding loan balance; as that gets smaller over time, your interest payment shrinks, and more of your payment goes to the principal.  

Every month of on-time payments will help you build good credit as your lender reports it to the credit bureaus, similar to earning grades in your classes. This can help you qualify for rental housing later—or even to buy a home—and some employers may also check your credit. 

Miss a payment, and that’s reported to the credit bureaus, too, which can damage your credit score and cause issues later. If you don’t pay up soon enough, your lender can also repossess your vehicle, causing further damage to your credit score. 

Why is it difficult to get a car loan as a college student?

If you’re familiar with student loans, you know you can borrow money easily now and repay it years later. Car loans—even ones designed for students—don’t work the same way. 

To get approved for a car loan, you’ll need to show a lender you can afford full payments starting immediately, lasting until the loan is paid off. In general—for almost all loans—lenders rely on your income and credit history when making lending decisions.

Here’s what the average used car loan looked like for a typical borrower during the third quarter of 2023, according to Experian data:

• Loan amount: $27,167
• Monthly payment: $533
• Interest rate: 11.35%
• Loan term length: 68 months
• Credit score: 690

As a college student, you may not have good credit or a strong income yet. You might not have either. In that case, it might be impossible to get a car loan on your own, but you might be able to get approved with help and patience.

How to improve your chances of qualifying for a car loan as a student

Getting approved for a car loan as a college student revolves around demonstrating sufficient credit history and income to persuade a lender you’re a reliable bet to repay the loan on schedule.  

If you haven’t already, it’s worth trying to get preapproved for an auto loan with a few lenders. Ensure they’ll do a soft credit pull, which won’t hurt your credit score. If you’re denied, you’ll get valuable information about what you can do to improve your application for next time. 

The options below can help you improve your chances of getting approved. Not all may apply to you right now, but they could in the future. You can click the action in the table for more advice—or keep scrolling.

Action	How it helps
Get a cosigner	Boost all-around odds of approval
Research affordable cars carefully	Lowers overall car ownership costs while increasing approval odds for smaller loans
Look for student-friendly lenders	Access special benefits or reduced pricing
Open a student credit card	Builds credit
Take out a credit-builder loan	Builds credit
Get listed as an authorized user	Builds credit
Work a part-time job	Builds credit

Get a cosigner

If you have a trusted family member or friend with better credit than you, consider asking them to cosign your auto loan. 

This can give your lender peace of mind to approve your loan because it can pursue your cosigner for repayment if you default, similar to a private student loan. 

Our expert advises: How to choose a cosigner

Crystal Rau

CFP®

As a college student, if you don’t have a sufficient credit history or sufficient income, a cosigner is vital in getting a lender to approve your auto loan. Having a cosigner ensures the loan will be approved and may provide you with better loan terms, i.e., a better interest rate. When it comes to choosing the right cosigner, pick someone who has a stable income, doesn’t have significant debt (a low debt-to-income ratio), and who you trust.

Research affordable cars

You may have to make sacrifices when it comes to the type of car you buy, opting for an affordable used car. (Wait to buy a Lamborghini later when your credit and income are better.) 

Don’t settle for just any cheap used car; you want one with high safety ratings and low maintenance and fuel costs, which you can find on Edmunds or Kelley Blue Book. This can help you save money on overall costs to maintain, insure, and operate your car. 

Look for student-friendly lenders

Some lenders and car sellers, such as Enterprise and Commerce Bank, offer special deals and perks for college students looking to get their first car loan. 

You may qualify for rate discounts as well as easier and more flexible approval requirements. Some lenders may allow you to use your good grades in lieu of a credit score, for example.

Open a student credit card

Establishing a positive credit history is one of the best things you can do to improve your credit score in the long run.

Credit cards are solid credit-building tools because you can keep them open indefinitely, even for your entire life. Many creditors will transition you to the full version of a credit card when you graduate, allowing you to keep your credit history anchored. 

Take out a credit-builder loan

Similar to a student credit card, taking out a small loan for the express purpose of building credit can be a good option. Many credit unions offer these loans. 

The downside is that you’ll eventually lose that credit history—unlike with a credit card you keep open—but it can provide enough of a credit boost to get started. Typically, it’s best to wait several months after opening any new credit before applying for more debt, such as a car loan.

Get listed as an authorized user

If you’re not sure opening your own credit card is wise, but you have someone in your life you trust, and who has better credit, another option is to ask them to list you as an authorized user on their credit card. 

You’ll get a credit card to use, but you’re not obligated to, and you can give them back the card for peace of mind. As long as you’re an authorized user on their card, you’ll have the same account history listed on your credit report, which could give your credit score a significant boost. 

Work a part-time job

You’ll need an income source to get approved. You won’t be able to postpone repaying your loan until you graduate college like you can with a student loan. 

Note: You likely can’t use your student loan funds to buy a car.

Where to get car loans for college students

You can apply for car loans as a student anywhere that offers auto loans, especially if a cosigner will back you up. But your search might be more fruitful if you begin looking with certain lenders. 

Our expert advises: Should a college student get a car loan?

Crystal Rau

CFP®

Everyone’s situation is different, and some college students will have a higher priority for needing a vehicle than others. First, analyze whether you can afford a car payment, and find a car that fits your needs. Sure, you can finance a car for 72 months, but that will put you in a hole before you even start. Within your means means putting at least 20% down and financing for no longer than 48 months. If you can afford that, it checks my first box. Second, a car may be necessary if you have a long distance to drive or need to go to multiple locations (such as school, work, or other obligations). Otherwise, it’s wise to make use of carpooling or public transportation. Having a car is terrific, but with the added cost of insurance, parking fees, and fuel, it can also be a burden.

Credit unions are often the best way to go for car loans. As community-focused nonprofits, credit unions are often more accepting of nontraditional applicants. Many are available nationwide but don’t forget to check in your local area, especially if any are active on your campus. 

Banks can be another option, but they might have steeper approval requirements and higher interest rates. 

It’s generally best to avoid buy-here-pay-here lenders (often advertised as “no credit check required”). They charge exorbitant rates and have many consumer-unfriendly practices.