A system for a vehicle having a data communications bus extending throughout the vehicle, and an audio entertainment system coupled to the data communications bus may include a vehicle wireless transceiver and a vehicle controller to be coupled to the data communications bus. The vehicle controller may be configured to determine and send a vehicle location alert via the vehicle wireless transceiver, and selectively set the audio entertainment system to link with the vehicle wireless transceiver in a hands-free mode. The system may also include a mobile device to be carried by a user remote from the vehicle that may include a remote wireless transceiver configured to link wirelessly with the vehicle wireless transceiver. The mobile device may also include a remote controller cooperating to command, based upon receiving the vehicle location alert, the vehicle controller to set the audio entertainment system into the hands-free mode.