How Old Do You Have to Be to Take Out a Car Loan?

In order to obtain a car loan, an individual must sign a legally binding contract. There are laws in place that govern who can be legally bound to a contract. For that reason, banks have established guidelines that require loan applicants to be a certain age. Beyond age, banks also look at other factors to determine who can take out a car loan.

Age Requirement

By law, with a few exceptions, an individual cannot sign a legally binding contract unless he is 18 or older. Therefore, an individual must be at least 18 in order to take out a car loan. Though an individual meets the age requirement, it does not mean the banks will approve him for a loan.

Good Credit

Banks will run a credit report to determine if the loan applicant has good credit. Because an 18-year-old is just getting started in life, he likely won't have a lot of opportunities to build his credit score. However, an easy way to build his score before he turns 18 is to "piggyback" on the credit of his parents or a close relative. In order to piggyback, an adult agrees to add the teenager's name as an authorized user on one or more of his credit accounts. When the teenager is listed as an authorized user, each time the adult makes a payment to the creditor, the payments are also reported to the teenager's credit profile. Before piggybacking, be sure the adult consistently makes payments on time. Otherwise, the late payments will damage the teenager's credit.

Sufficient Income

The teenager must have a steady income stream in order to take out a car loan. He must be able to prove his income level and employment. Without an income stream and steady employment, the bank has no way of determining if the individual is financially able to pay back the loan.


If the teenager does not have a good credit history and sufficient income, the banks will still allow him to take out a loan. However, the loan must have a co-signer. A co-signer is an individual who signs his name to the loan contract. The co-signer promises to be financially responsible if the teenager defaults on the loan.