If you have no credit history, the financial effect of buying a car will be steep. However, the pain will not be felt by the purchase price; the buyer will feel the effect when making payments. That's if the car dealership even decides to sell to someone without a credit history.
Interest Rate
Your credit really only comes into effect when determining the interest rate you will pay on your car loan. If you have little or no credit history, lenders may be fearful to lend you money because they don't know if you are a good or bad financial consumer. As a result, to offset the risk, the lender will charge a higher interest rate.
No Sale
When buying a car from a dealership, you may seek financing through the company. Or you may talk to your bank to get a loan. Because of your lack of a credit history, both may deny you a loan or financing because neither would want to take on the risk. Therefore, there may not even be a sale, which means you don't get a car. Car dealers are not obligated to sell you a car, especially with so much risk involved.
Buy it Outright
If you are denied a loan to buy the car at an ideal interest rate, then consider buying the car outright without taking on a loan. This can only be done if you have the financial ability -- the right amount of money saved up in the bank. That way, your credit history makes no difference to the dealership because there are no financing or borrowing terms required.
Establish Credit
If you are unable to buy the car outright or your can't get ideal terms from the lender due to your lack of credit history, then consider establishing credit before buying the car. Start by getting your first credit card. Get a secured limit. Your credit score is built on five pillars -- your ability to pay on time, keeping your debt ratio low (both of which make up 65 percent of your score), length of history, new credit and types of credit used (such as having a mix of credit cards, mortgages and other loans).
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