Being a first time auto buyer is exciting, but it may also feel a little overwhelming. That’s understandable if you’ve never done it before. You likely have questions about the car buying process, everything from which first-time car financing options are available to you to the loan application process.
While we can’t help you take a test drive and decide which vehicle to buy, we can help you with understanding car loan requirements, how the auto loan approval process works, and useful information about interest rates for car loans and how they impact financing a car.
The question of down payments is one that may loom large for any first time car buyer. Here are some down payment tips to help you determine how much you need to save and what impact your down payment will have on your vehicle loan amount.
Our rule of thumb is that you should make the largest down payment you can afford without negatively impacting your finances. Many experts suggest a 20% down payment for a new vehicle and a 10% down payment for pre-owned inventory. The average price of a new car in 2025 is over $49,000, so that would translate to a down payment between $4,900 and $9,800.
If you can’t afford that much, you can put down less. The main thing to keep in mind is that a larger down payment means borrowing less money. In turn, that means a lower monthly payment and a more advantageous interest rate.
People who can’t afford a 20% down payment may still be able to buy a vehicle. You may have the opportunity to refinance down the line, and you also have the option of making extra payments to reduce the total interest you’ll pay over the term of your loan.
If you're curious about how much you can afford, you can use an auto loan calculator to estimate different payment plans by adjusting down payments, monthly payments, and interest rates. Visit our online finance center to learn more and see if there are any incentives for using digital banking, online banking, or setting up automatic payments.
First-time car buying tips can help you avoid some of the most common first time buyer mistakes, which may include things that increase your payments.
These auto financing tips can help you prepare and find the best deal available. If you’re not sure how much you can afford to borrow, our monthly loan payment calculator can help you figure that out.
Finding the best car loans for first-time buyers isn’t always easy. We recommend that you shop around to find the best interest rates, keeping in mind that qualifying for an advantageous APR will result in a lower car payment every month.
The first financing option is a new or used auto loan from your credit union or bank. As a rule, credit unions offer more competitive financing than banks because they pass profits to their members instead of to shareholders.
In many cases, you can find a flexible loan term starting as low as 12 months and going all the way up to 96 months. Opting for a longer term may result in lower monthly payments, but you’ll pay more in interest over the term of the loan.
Traditional lenders may also offer things like loan protection, warranties, and the option to skip a payment if necessary.
Some people who already own a home may use home equity, either a loan or line of credit, to buy a new car. It’s rare for a first-time car buyer to already be a homeowner, but if you are, this may be an option for you.
The final option is dealer financing. A car dealer can be so eager to make a sale that they’ll offer you financing. They’re hoping that you aren’t preapproved with a lender. Keep in mind that a dealer rarely offers the most advantageous interest rates. Going in with a preapproval is useful because you’ll know exactly what you can get from a traditional lender.
You’ll need a bit of time and patience to find the best car loans for first-time buyers, but it’s worthwhile to do some research to make sure you’re not paying too much.
Some buyers may not have the money for a down payment on a first car purchase and wonder if leasing a car would be a better option. Here are some of the pros and cons of leasing.
As a contrast, here are some of the pros and cons of buying a vehicle.
In the end, it’s really about your money and how you want to spend it. People who want to build equity and have more freedom to use their vehicle as they wish will likely prefer to buy a car instead of leasing one.
Here are a few common questions that we often hear from first-time vehicle buyers.
Most lenders (including dealerships) will require:
Interest rates for vehicle loans are based on several factors, including your credit score, payment history, the amount of your down payment, and other factors. If you’re a first-time car buyer and your credit history is limited, you may end up with a higher rate than you would if you had more established credit.
If you want to improve your credit score, start by ordering free credit reports. Review them and if there are any errors, contact the credit bureaus to correct them. You can improve your score over time by making on-time payments and paying down your outstanding debt to improve your debt-to-income ratio.
The typical auto loans approval process may take anywhere from a few hours to several days, depending on the lenders or dealerships. If you submit a complete application with all necessary paperwork, you’ll probably get a quick turnaround time. Some lenders, including Leaders, allow members to apply online and get a quick preapproval.
Buying your first car is a big deal, and now you’re armed with the information and guidance to make it a smooth ride. The most important thing you can do is go into the financing process prepared—knowing what you can afford and what to expect.
To help even more, we’ve created The Ultimate First-Time Car Buyer’s Checklist—a free resource to guide you through every step of the journey, from budgeting to getting behind the wheel.
We want you to find the best vehicle loan you can. Explore our car loan options and apply online to get started!
Leaders Credit Union is federally insured by the NCUA.