H1B Visa Buy New or Used Car In USA?

By Anil Gupta, 10  Finance

Can you buy a new Car while on H1B or L1 work visas in USA? Should you buy an old car or a new car? Can you get car loan for new car? Yes, you can.


I am writing this on the basis of my own experience in the USA working on H1B visa.

My H1B case has been nothing short of a roller coaster ride with complete uo-side down days as well. I will probably discuss the issues that I faced in some other article as this one is specifically for the Car buying issues and solutions while you are in USA.

H1B visa buy car? Should I actually buy car while I am not permanent here?

The answer depends a lot on your office, residential location and availability of public transport.
I have been in USA on short trips (1.5 – 3 months) and long trips (9 months – 1 year) and have been lucky to stay at a location where the public transport was available even though it was a small city.

If you can manage without a car (which usually is not the case in USA), it is advisable to wait for about 4-5 months and build a credit history. Good credit history will certainly help you procure a car loan at a good rate. Else, you can buy an used car (which I do not recommend due to its high maintenance cost and non-reliability).

Should You Buy a New Car or A Used Car?

This decision largely depends on person to person but in m y opinion, it is always beneficial to buy a new one if your stay is going to be longer than 13 months.
This is certainly contradictory to what you would normally hear from your peers when you land here in USA for the first time.

They would almost always advise you to buy a used car within the budget of about 4-5K dollars and save money. The primary reason behind this is ‘No credit’ history and hence you can’t afford to buy a car on your own. Also, what if you have to leave the country. I would agree to it to some extent but if you have plans here to live long term, this decision is certainly not going to benefit as far as saving money is concerned.

I would advise you to buy a new car. You can certainly get loans. Read on to find how.

Can you get new car loan on on H1B or L1 visa?

Can you get new car loan on on H1B or L1 visa?

Can Temporary H1B and L1 workers get Car Loan?

Yes, they can. I have got one for buying a Honda car myself and can certainly vouch for it.
You may face a bit of issue with the conventional national bank like ‘Bank Of America’ Or ‘Chase’ as they normally do NOT issue car loans for a tenure more than your Visa’s validity.

But, if you have heard about ‘Credit Unions’, you have hit the bull’s eye. They are nothing but small financial institutions who are more state centered than the National. They are flexible in their lending policies than the National banks.

I got my car loan financed from ‘Digital Credit Union’ in MA within just 1 hour. My H1B visa had a stamp of only 3 years but they still gave me car loan for 5 years. They basically look at your past 2-3 month’s record and a credit history, if any.
Also, if you are fresh out of India, your history would be zero. They would still give out a loan to you but with a higher interest rate.

Don’t worry, The higher interest rate in USA would be somewhere around 7-8% per annum. Compare this with what you get in India and you will certainly feel happy. Mine was financed at 1.99% Per Annum since I had 6 months of credit history.

So, I would advise you to contact a ‘Credit Union’ and get your car financed easily.

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.

 New Old
Starting Mileage10 miles100,000 miles
Peace Of MindYou are almost 99.9% sure that a new car would not break-down for next 100,000 miles.You are almost 99.9% sure that the OLD car can break down anytime after 100,000 miles.Break down in USA is not a small thing. Even a one time towing charges can dent your pocket with about $1200. So, be careful.
Gas Mileage 35 per gallon30 per gallon
Un-Accounted MaintenanceYou can almost assume the un-accounted maintenance to be equal to zero.Un-accounted maintenance generally is in the range of about $150-200 per month. I am averaging it out as there might be some months where you don’t spend anything but others may see an expense for about $400.

And yes, do not make the mistake of assuming there would be no maintenance on Honda or Toyota used cars. I have heard it from many desi friends who are senior just by the virtue of coming to USA earlier than you.

Every used car needs maintenance. It depends on your luck on how big a hole it digs in your pocket.

Taking Car Loan helps build credit history?

Yes, that is true. You can get a car 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 be it car loan or credit card helps you build your history.
The only difference is that if you have at-least 4-5 months of history, you can get a pretty good deal on the annual percent rates. Else, you might have to pay a little higher.

My case

I stayed in Jacksonville, Florida for about 9 months (H1B visa had the validity of only 1 year) without a car. I used the public buses to commute to office or used to take help from fellow workers. The grocery stores were at walking distance from out apartment and hence we could manage. The idea was simply to buy some time to build a fair credit history and get a longer validity on H1B visa.

After 9 months, I got the visa extension and moved to MA as part of Job change. I immediately applied for car loan at this time with my credit history rating of 678. To my surprise, DCU.org did not even see my Visa’s validity and approved my loan @1.99% for 5 years. Also, I only paid $2000 as down payment at this time. At the same time, the 3 year loan was available @ 0.99% per annum but I simply opted for longer term.

1.99% per annum is actually quite low interest rate if I compare it with India. I opted for longer term keeping in mind that I can probably park the extra money in ‘Fixed deposit’ scheme in India
to earn about 9% P.A.

If you have any more questions regarding buying a car on H1B visa or L1 work visa, do share them in the comments and I would love to answer to the best of my knowledge.

  • vivekvermani

    Lesson learned hard way but even i feel that buying a new car is a better option. The major reason is the Cost of Maintenance. I ended up paying more than 300$ a month on Car keeping in mind its depreciation and Maintenance ( As I had no idea regarding my car and went with whatever Mechanic asked me to do ). I could have got one on lease for little less than 250$ a month 🙂

  • 🙂 I learned this lesson while looking at my friends….but..better late than never.

  • I’m moving to US soon on H1b so that means my credit score would be zero. I’m planning to get a new car financed. Who would have better interest rate? Dealer (BMW finance) or Credit unions?
    And lets assume i start with car loan at ~7%, can i reduce it to ~2% once i’ve credit score in say 6-10 months?

  • Hi Geeknizer,

    1. If you have never been to USA before, then yes, your score will start from zero. If you have been here before and had some kind of banking activity like opened an account or had a credit card (issued in USA), you would have some history, else no.

    Keeping in mind that you have zero history, credit Union would offer a better rate than the dealer. As a matter of fact, dealers also have tie ups with these credit Unions and they most probably would try to route your loan from there too. They make money of each referral. You know what I mean.

    In my specific case, even though Honda also offers the loan on their own cars, dealer tried to process it through Chase bank, then a credit Union which was Out of state and a third bank too. But, they all refused the loan even when I had credit score of about 700 and 1 year of history.

    Then, I applied in local credit Union (within my current state) and they approved immediately!
    I have found credit Unions to be more friendly with immigrants with respect to financing.

    2. Yes, you can reduce your loan rate anytime you are eligible and some other credit Union or bank is offering it to you. But, remember, there would always be some administrative or processing fee attached if you try to change the rate within same bank or Union.
    Normally, if you are transferring your loan to a new bank or Union, they would absorb or waive these fees.

    All the best.

  • Nidhin

    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..

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

  • Prateek Chawla

    Hey, Off topic but would you suggest buying or renting a house while on L1 Visa?

  • Hi Prateek,
    It depends on your choice of staying back in USA and couple of other factors. The primary one that should define the ‘buying’ decision should be:

    1. Are you planning to file for GC (Green card)? If yes, and you have plan to stay here for at-least 8 years, then, yes, you should buy it.
    2. If your job location is permanent, then yes, you should buy a house.
    3. Housing market in USA is NOT like we have, back in India. The house prices here fall like anything if there is recession. You know what happened in 2008.
    Also, monthly maintenance and house tax are pretty high in USA, if compared with house in India.
    If you okay with managing those expenses, you should buy it.
    4. If your monthly rent is greater than $1200, you should consider buying a house. If it is less than 1200 for a house of your choice, you can avoid buying it.
    This is simply because, I feel that buying a house makes you inflexible with respect to job location. Since, your job location is highly dependent on visa and visa is tied to a location, you may have to move at-least once or twice in a span of 5 years.

    Movement is almost guaranteed if you move on to H1B visa.
    5. If you move to H1B and work as a consultant, you should first place yourself in a city where there are ample project opportunities and then buy a home.
    6. If you talk about us, we have not yet bought one here :). Still waiting for some more stability and cooling-off of housing prices.

    I would try to do an article on this topic for more detailed pros and cons.

    Let me know if you have any specific question in your mind or you need more information.

  • ANISH MATHEW

    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.

  • Thanks Anish for your comment. We appreciate it.