Can students get car finance?

By Geoff

The transition from school life to university or college is probably one of the biggest you’ll ever experience in your life. There’s no doubt that it’s exciting.

For many young people, it’s a place away from home for the first time: with the freedom that comes with it. It means new friends and the creation of many great memories.Student Driver Learning To Drive

However, starting university can also be a difficult transition. In many cases, you leave behind the familiar and are faced with ‘new’ everything.

One of the most desirable things for a student is owning a car. Freedom to go back home whenever you need to, get to a new part-time job, or get a bigger shop!

But…how do you get a reliable car as a student? Most financial experts will agree – using a student loan for financial obligations can be difficult to justify to lenders. But it’s not impossible.

Read on to find out why getting student car finance as a student can be tricky and how to get around it.

Why car finance for students can be tricky

Unfortunately, students have a bit of a stereotype: that they’re financially irresponsible. For lenders, this is because a student probably doesn’t have any credit history or proof to show that they’re ‘good for car finance.

Your credit score is the key to why it’s hard to get a student car loan. Getting any loan as a student outside of your actual student loan is challenging.

If you have a solid part-time job and a bank account, you might have more luck. Usually, though, you need to have worked there for a decent amount of time; this shows that the income is reliable and consistent. Even then, though, many lenders won’t consider your application which can be frustrating.

You might feel that you’re bringing in more than enough money to make a car payment with your student loan and money from a part-time job. Unfortunately, though, lenders don’t consider your university loan an income as young drivers: as it’s supposed to be for your tuition and living costs. A car isn’t seen as essential.

Can you get a student car finance with low income

The odds are stacked against you getting car finance as a student, but if you don’t have an income…it’s even more unlikely.

There are some ways to get yourself a car finance agreement, though. You can opt for a guarantor car finance agreement. A guarantor loan is when a trusted person with a good financial history (usually a parent or guardian) co-signs the agreement with you.

The ‘guarantor’ agrees to ‘guarantee’ that the payments are made if you fail to make the repayments; they’re legally liable to pay it. A guarantor car loan can be tricky, as you’ll need to find someone comfortable with signing this for you.

Also, if you don’t have a reliable income: think carefully about whether a car is right for you at the minute, regardless of whether you’re considering student car finance or not. Unless you have the savings to buy something outright.

Remember, university is ultimately about investing in your future. Work hard and you’ll have plenty of time for car loans later.

No track record (credit history & credit rating)

Other than income, your credit history is the main reason that it’s difficult to get student car finance.

A credit rating is essentially a view of how reliably you’ve met all of your past financial obligations. For example, if you have a mobile phone contract and pay it off every month, you’ll get a positive credit rating from that. If you run over your minutes and put off paying it for six months, this will hammer your credit rating.

Many students haven’t had past financial obligations, especially with regards to car finance! Which can make it hard for a credit broker to justify lending to them.

With this in mind, it’s worth starting to build up your credit rating as soon as possible. Take out a student credit card. Use it for a grocery shop every month, and set a direct debit to pay it off.

If you’re lucky enough to have your parents paying for your mobile phone, ask to take the next one out in your name. Doing so will build a track record of you as a financially responsible individual.

That being said, if you do have a decent income but a bad (or non-existent – credit rating, you still might be able to get a car finance deal. Some credit brokers and lenders offer bad credit score car finance for students with a poor credit score.

Choosing a car for a student

As a student, you’re probably not going to buy a new BMW or Jaguar: so be realistic in your expectations. At Young Car Driver, we tend to recommend a city car or a supermini. They offer the best value in terms of ease of driving, up-front cost, and the cost of running.

Before deciding on a car, you really must check out the insurance price. Each car is in an insurance group, which runs from 1-50, with one being the cheapest. Typically, the more powerful the engine, the more expensive the insurance cost for your vehicle, but other factors are also considered.

Unfortunately, your car insurance will be really high as a student: but if you can stomach it and pay it, it’ll reduce significantly over time, especially if you don’t make any car insurance claims.

So why choose student car finance?

You might have come to this article thinking, ‘Can I get car finance as a student?’ But…why should you choose car finance anyway?

To make a long story short, car finance for young drivers is simply a way of getting yourself in a car that doesn’t involve you just buying it outright.

Now, you might have the savings to buy an old car. But that doesn’t mean you should. Buying an extremely old or high mileage car might be in your budget, but it can be really unreliable.

You might not pay much upfront as a young driver, but you could end up sinking a fortune into keeping the car running.

If you’re buying a car to go back and see your family or get to a part-time job, you must purchase something reliable (and comfortable).

Car finance for students allows you to make a monthly payment to get yourself in a decent car. It usually means you can afford something newer and more reliable than if you bought outright.

Other student car finance benefits

Another benefit of car finance for students is that you can start to build up that credit rating. If you reliably make your monthly payments, you’ll really bolster your credit score and credit history.

Having a good credit history or credit score as a student can really work in your favour in the future if you decide to get on the property ladder, take out a personal loan, or even a loan to start a business. Having a good credit rating opens up so many doors as a way of helping to secure car finance.

Overall, student car finance deals can be the best way to get a reliable car. You won’t have to use up all your savings, and you’ll know what the monthly payments will be so that you can budget accordingly. Of course, it goes without saying; you should make sure you can afford young drivers car finance.

Consider the summer months when that student loan goes dry: can you still make the monthly payment?

Also, consider talking to your parents or a loved one you trust, and ask to review your budget. A second opinion is always worth getting!

If you’re confident you can, go for it and secure a great car finance deal today, but make sure you get a car within your budget.

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