How to buy your first car as a teenager

Most teenagers have little or no credit history, which can make getting a car loan challenging. Plus, credit blunders — like making late payments or no payments at all — can take a toll on a credit score for years.

But that doesn’t have to stop you getting the car you want. In this guide we’ll show you how to buy a car as a teenager, how to compare car loans for young drivers, and what sales traps and hidden costs to watch out for before you sign on the dotted line.

Can I buy a car as a teenager?

Yes, you can buy a car on your own if you’re a teenager — but you’ll need to be the age of the majority in your province or territory. Even if you are old enough, you’ll have a difficult time qualifying for a car loan if you haven’t yet built up your credit history or have red marks on your credit report. In that case, you’ll likely need to bring on a cosigner with an established credit history to qualify for financing.

How old do you have to be to finance a car?

You have to be the age of majority in your province or territory to finance a car. That means you need to be 18 years old to finance a car in Alberta, Manitoba, Ontario, PEI, Quebec and Saskatchewan. You’ll have to wait until you’re 19 years old to get auto financing in British Columbia, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, Nunavut and Yukon.

Some of the best first cars for teenagers in Canada

Model	MSRP	Features
2024 Hyundai Kona	$25,999	One of the most affordable all-wheel drives on the market One of the best-selling SUVs in Canada Features Hyundai SmartSense active safety tech An IIHS 2024 Top Safety Pick+ recipient Comes with Apple CarPlay® and Android Auto
2024 Mazda3	$24,200	Features Advanced Blind Spot Monitoring and Rear Cross Traffic Alert Meter set with 7-inch LCD display An IIHS 2024 Top Safety Pick+ recipient Comes with Apple CarPlay® and Android Auto
2024 Kia Seltos	$28,083	Standard safety features include advanced Blind-Spot Collision-Avoidance Assist (BCA), Rear Cross-Traffic Avoidance Assist (RCA), Lane Keep Assist (LKA) Equipped with Kia Connect (can your smartphone to start and pre-warm/pre-cool the cabin) Comes with Apple CarPlay® and Android Auto

• How we chose the best first cars for teenagers

  We chose the cars on this list based on factors like price, safety and standard features. This is not meant to be a conclusive list of the top cars for teens, but is rather supposed to help you narrow down options based on some important features. No car will be the best for every teenager, so make sure to compare your options before deciding on the best car for your needs.

4 ways to finance your first car as a teenager

There generally 4 ways you can finance your first car:

1. Online car loans for young drivers

Since you’ll likely have no or little credit history when you’re ready to buy a car as a teenager, your best bet is to look for car loan lenders specializes in bad credit. Rates vary but can be high, so it pays to shop around to get the best deal.

Must read: Best car loans in Canada

2. Get a cosigner

If you’re finding it difficult to get a car loan with little or no credit – or perhaps the interest rates you’re offered are too high – a cosigner with good to excellent credit might be your best option. Many banks or online lenders accept cosigners on car loans, especially for existing account holders. Keep in mind that even with a cosigner, most car loans for young drivers require the borrower to be at least 18 years old.

Dive deeper: Compare car loan interest rates in Canada

3. Save up over time

If a vehicle is a must-have, saving a few dollars out of each paycheck can add up. Whether you’ve got a part-time job or work odd-jobs around your house or neighborhood, consistently setting aside money can give you more options and help you save when you’re ready to buy your first car. A combined savings approach between parents and teens can make this an option that doubles as a valuable teaching experience.

Dive deeper: Compare the best high-interest savings accounts in Canada

4. Crowdfunding

Although it might seem like a strange way to raise money for a car, crowdfunding can give you a way to raise donations from friends and family who want to help you get your first set of wheels. You probably won’t get money from complete strangers this way, but crowdfunding can still provide a convenient way for those who care about you to help you reach your savings goals. If you’re thinking of crowdfunding your first car as a teenager, consider using popular sites like GoFundMe and Fundrazr.

What to keep in mind when comparing car loans for young drivers

When you’ve found that perfect car, it may be tempting to grab the first loan that comes around — but it might not be the best loan. Avoid these pitfalls when shopping:

• Ignoring the rates and fees outlined in your contract. Some dealerships offer low-interest financing up front, then slip in higher rates and fees when it comes time to sign the contract. Look out for exorbitant fees for late payments, penalties for prepayment or adjustable rates, which can mean much higher payments down the road as interest rates rise.
• Packing payments. Some dealers will get borrowers to agree to an inflated monthly payment, then “pack” the loan with products like paint protection packages, extended warranties or anti-theft devices that they claim are either free or discounted.
• Opting for a loan extension. Dealers will often offer to extend a loan to six or seven years. While this will lower the monthly payment, you’ll end paying on the loan a lot longer — which means paying much more towards interest. You may even end up owing more than the car is worth.

Car loan costs and fees to watch out for

When a car loan includes more costs than you expected, you may be paying too much. Make sure you look out for these added — and sometimes hidden — costs before you sign the loan documents.

• Documentation fees. Aside from paying taxes and licensing costs, you might be on the hook for registration and documentation fees, which can easily range from $100 to over $200 depending on where in Canada you live. Before signing, ask the dealership to give you an “out-the-door” price that factors in these extra expenses.
• Dealer financing fees. Dealer financing can often include an added dealer fee on top of the low quoted interest rate for an auto loan. Ask for the APR — interest rate plus taxes and fees — instead of just the base interest rate to make sure you know exactly what you’re paying for.
• Prepayment penalties. Some lenders add in a hidden fee called a prepayment penalty for paying off your loan early. Have your lender point this out if such a fee exists, and try to negotiate it down if you can.
• GAP insurance. GAP insurance pays the difference between what is owed on your car and what the insurance company will pay if your car is stolen or totaled. This is optional, so don’t let your dealership or lender tell you differently. If you do decide to purchase a policy, think twice before bundling the cost with your loan, since it will add to your interest payment each month.
• Extended warranties. Also called service contracts, these warranties cover many of the more expensive costs of repairing your vehicle not covered by your manufacturer’s warranty. However, it can get expensive. And the majority of customers don’t end up using it, so consider whether it’s worth it before buying.

4 car-buying tips for teenagers

There’s no undo button when it comes to buying a car. Make sure you follow these tips to get the best deal when you buy a car as a teenager.

1. Consider used. As a first-time car buyer, it’s more important than ever to find the best vehicle at the price you need — and that may mean buying a used car. These days you don’t have to go in to a dealership to shop used cars, because there many used car sites and online dealerships designed to help you shop entirely or mostly online for a used car.
2. Safety first. Used or new, check safety ratings on the National Highway Traffic Safety Administration website to ensure you’re buying a safe ride. Check out our full guide to car safety ratings to learn what to look out for.
3. Test drive it. Before buying a vehicle, take the time to do a test drive. Not all vehicles fit all people. When you’re shopping for your first car as a teenager, make sure to take things like blind spots, roominess and comfort into consideration.
4. Check the records. If you’re buying used, look at the maintenance records to see if the vehicle was well maintained. Also think about the number of kilometres on the car. That shiny red convertible may look good — but you may want to look at another car if it’s already at 300,000 km. If it has fewer than 150,000 km on it, the original manufacturer warranty may still apply.

Bottom line

There’s a lot to consider if you want to learn how to buy a car as a teenager. Car loans for young drivers can set the stage for establishing a credit history. And keeping up with repayments will pave the way to a high credit score, which will come in handy when you’re looking to buy your first home or qualify for a competitive credit card.

Educate yourself before visiting a dealership so you can get the best deal possible on a car. To help, you can check out our guide to getting a car loan.

Frequently asked questions about buying a car as a teenager

• What information will I need for a car loan?

  Besides asking for your personal information, lenders will check your credit, verify your income and request details about the car you’re purchasing — like its make and model, mileage and purchase price.

• What's an APR?

  APR stands for annual percentage rate — or the yearly rate of interest that you’ll pay on the loan, plus any taxes and fees. It's also known as the true interest rate. Most often, APRs for auto loans are fixed, meaning your APR will remain the same throughout the life of the loan.

• Is it best to get a loan through a bank or dealership?

  It’s better to get a loan that suits your needs and your budget, no matter where it comes from. Some people feel they’ll get the best deal online, while others want the customer service of a bank or credit union.

  No matter what you decide, compare prices with different lenders until you feel comfortable with your rate, term and monthly payment.

• How old do you have to be to finance a car in Ontario?

  Most lenders will require you to be 18 years of age or older to qualify for a car loan in Ontario.

• Can a 17-year-old get a car loan with a cosigner?

  No. Lenders will typically require you to be the age of majority in your province or territory before allowing you to sign a loan contract.