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:
- High maintenance cost and
- Non-reliability
- Loan APR is higher on used cars
- The insurance premium is high
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.
This article will discuss:
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.
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.
Popular used cars for international students, new H1B, L workers in the USA in the price range of 4k to 6k with around 80k miles and 8-year-old model:
- Nissan Sentra
- Toyota Corolla
- Honda Civic
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.
If you do want to buy a used car, go for only top 3 reliable brands Toyota, Honda and Nissan as they hold their resale value.
Credit Union vs National Banks
You may face credit denials from conventional national banks like ‘Bank Of America’ or ‘Chase’. They usually do not give out car loans for tenure more than your H1B Visa’s validity either.
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.
Benefits of Auto Loan from Credit Union:
- Low APR (interest rate) than Bank
- Faster Processing
- No guarantor required even if you have no credit or low credit history
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.
DCU even lowers your APR rate after 3 months of loan if you have been repaying on time without fault. I have seen an automatic reduction of 0.25% in APR.
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.
If you try to talk to the car finance guy at the dealership, they will confuse you with lease jargons like:
- Residual value
- Lease break fee
- Vehicle return fee
- Documentation fee
- etc..etc.
The salesperson 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.
| New | Used | |
|---|---|---|
| Starting Mileage | 10 miles | 100,000 miles |
| Peace Of Mind | 99.9% 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 Mileage | 35/ gallon | 30/ gallon |
| Un-Accounted Maintenance | Assume 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.
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Photo printing includedH1B 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.
FAQ
US Car loan helps build your credit history.
Any temporary worker in US on H1B or L visa can get car loan.
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.
The APR is decided based on your credit history. Low credit history means high APR.
APR is nothing but an 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.
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.
