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 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.
|Starting Mileage||10 miles||100,000 miles|
|Peace Of Mind||You 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 gallon||30 per gallon|
|Un-Accounted Maintenance||You 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.
Does 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.
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.