H1B Visa Buy New, Used Car In USA, Lease vs Loan?

Buy a new car while on H1B or L1 work visas in USA. Easy loan from credit union on low-interest APR builds credit history. Buying is better than leasing.

Written by Anil Gupta
  By Anil Gupta    Updated  6 May, 20


H1B or L visa is a work visa and can be extended indefinitely by your employer. You are semi-permanent in the USA in the sense that you can stay and work until the visa extension is denied.

If you can manage without a car, which usually is not the case in the USA, it is advisable to wait for about 4-5 months and build a good credit history. A good credit history helps you get a car loan at a lower interest rate which is commonly known as APR in the USA.

Most newcomers opt for buying a used car which I do not recommend due to its high maintenance cost and non-reliability.

Remember that Car insurance in the US is charged on per month basis and can cost from $40 for just liability to up-to $200 for comprehensive coverage for newcomers to the USA.

Does Car Loan helps build credit history in US?

US Car loan helps build your credit history.

Can Temporary H1B and L1 workers get Car Loan?

Any temporary worker in US on H1B or L visa can get car loan.

Can H1B visa worker get Auto Loan with Zero Credit History?

If you are new to the USA, your credit history would be zero. Most Credit Unions would still give out an auto loan to you but possibly with a higher interest rate or a guarantor signature.

We recommend DCU Credit Union.

You should know whom to contact and how to negotiate on car deals.

Can I get Low APR for Used car Loan on H1B Visa?

The APR is decided based on your credit history. Low credit history means high APR.

APR is nothing but interest rate in the US.

You can get low APR on used car loan but it would always be higher than a new car as bank’s think that used car has more risk of breaking down.

If the used car is outside of the manufacturer warranty period of normal 3 years, then, expect the APR to be easily 1% higher than normal.

Is Certified Car better than Non-Certified Used Car?

A certified tag on a used car is a marketing trick. A Honda dealer selling a certified used Honda car will easily mark up the price by USD $500-1k to add that ‘Certified’ tag.

The dealer would simply check the car and do not give any extra warranty other then what is given on a new car by the manufacturer. They would push you to buy an extended warranty anyway.

It’s up to you to pay a higher premium for certified cars or not. I do not see any extra value personally.

Buy New or Used Car?

Buying a new or old car decision varies by person to person but in my opinion, it is always beneficial to buy a new one if your stay is going to be longer than 13 months.

My opinion may sound contradictory to what you would normally hear from your peers when you land here in the USA for the first time.

Most would almost always advise you to go for a used car within the budget of about USD 4-5K and save money. The primary reason behind this is ‘No credit’ history.

I would advise you to buy a new car. You can certainly get an Auto loan and that too within an hour with no credit history.

Credit Union vs National Banks

You may face credit denials from conventional national banks like ‘Bank Of America’ or ‘Chase’. They also do not give out car loans for tenure more than your H1B Visa’s validity.

My suggestion is to contact local ‘Credit Unions’ as they are flexible in their lending policies. They are nothing but small financial institutions that are more state-centered than the national market.

I know many people who got a 5-year car loan financed from ‘Digital Credit Union’ in MA within an hour and that too with an H1B visa validity of only 3 years. Similar credit Union banks operate in each state like California has CCU and Texans Credit Union for Texas residents. Do search for one in your state.

Car Manufacturer Finance Deals

Honda, Toyota, and Nissan are the favorite brands due to their good resale value, engine reliability and better mileage. Keeping in mind the high demand for their family vehicles, these companies have also started 0% APR (zero percent interest) car loan offers if you get finance from their own sister companies.

Example:

Honda finance will lease or sell any of their cars from Civic to CRV for 0% if you opt for Honda Financing.

Similarly, Toyota will be happy to sell you their best selling Camry at no interest cost to you.

I have seen more aggressive auto finance offers from Nissan though as they are trying to compete for your business with market leaders Honda and Toyota.

Lease vs Buy

I strongly suggest buying the car even if you have to use bank finance than leasing. If you are not an expert in negotiations or do not understand the leasing tricks, you will almost always pay more for the car in a lease than buying.

They will always try to sell you a lease deal by showing lower monthly payments as compared to finance, but, mark my words that you will pay more for the same car at the end of the lease than finance.

Cost Benefit Analysis of New Vs Old Car

We assume the car to be a Honda Accord or its equivalent like Toyota Camry in this example.

NewUsed
Starting Mileage10 miles100,000 miles
Peace Of Mind99.9% sure – No break-down in 100,000 miles.99.9% sure – OLD car can break down anytime after 100,000 miles. Break down in USA even once can dent your pocket with about $800 in towing charges.
Gas Mileage35/ gallon30/ gallon
Un-Accounted MaintenanceAssume zero.Assume about $150-200/ month. Do not make the mistake of assuming there would be no maintenance on used Honda or Toyota cars. Every used car needs maintenance. It depends on your luck on how big a hole it digs in your pocket.

You can get an Auto loan from the car dealer or a credit union easily even if you do not have a credit history. Remember that any kind of credit helps you build your history.

The only difference is that if you have at least 4-5 months of history, you can get a lower APR (interest rate) deal on the annual percentage rates. Else, you might have to pay a little higher.

H1B Car buying case – Example

H1B lands in the USA with 9 months left on the approved 1 year. Used city’s average public bus transport (and no train) to commute to the office or used to take help from fellow workers.

The grocery stores were within walking distance. The idea was to buy some time and build a fair credit history. Meanwhile, apply for H1B extension to get longer validity.

After 9 months, with a visa extension of 3 years, he applied for a car loan with credit union DCU.org and a credit history rating of 678.
The loan was quickly approved by credit union even when it was denied by Chase bank and Honda Finance (from the dealer) before contacting DCU.


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Written by Anil Gupta
  By Anil Gupta           

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Recent discussion on forum

  1. nidhin4
    nidhin4

    Hey, there is an option to refinance your car loan which enables you to buy the car within 2 months of landing in the US. Your initial 4 months will be on a higher interest rate and then you can refinance the loan with a much lower interest rate once your credit history builds up.


  2. Anil.Gupta
    Anil.Gupta

    Yes Nidhin, You are right. That’s also a good option.
    Thanks for sharing.


  3. infoanishmathe
    infoanishmathe

    This post is 100 true. Buy a new car, not a used car if you need peace of mind and hassle free life. You will be sure of what you get and never need to look back.

    Used car is always a pain and almost all used cars has one or the other issues. Very few cars are issueless. You have to be super lucky to get one.

    So get a nice and reliable car. You can always go for mid options than base models and keep your mind at peace.


  4. Anil.Gupta
    Anil.Gupta

    Thanks Anish for your comment. We appreciate it.


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