Can I Get Car Finance with a Provisional Licence?

By Geoff

You’ll probably find getting your full uk driving licence in general a challenge…but getting car finance with a provisional licence might be even tougher.

However, in theory, as long as you have a provisional driving license, you might be able to be accepted for car finance. But there’s no guarantee.

One caveat to this is that you need to be at least 18 because UK law states that you must be 18 to sign a finance agreement. So if you’re 17 and have just got your provisional licence, you’ll likely have to hold off for a while.

Can I get accepted for car finance with a provisional licence?

So why is it so challenging?

Simply put, many finance providers won’t entertain the idea of lending to someone with a provisional, as there’s no guarantee you’ll pass your test in good-time. Also, if you’re a young driver looking for car finance, it’ll be especially tough (sometimes, even when you pass the test).Young Driver with provisional licence and car finance

The reason is that someone with a provisional is a risk. They haven’t passed their test, but even when they do, they remain inexperienced drivers. Meaning if you do get accepted for vehicle finance, you’ll likely have to face stricter borrowing limits and an increased annual interest rate leading to higher monthly repayments. Likewise, you can even get a limit on the sort (or size) of car you’ll be eligible to apply for.

It’s not all doom and gloom, though. There are some finance companies out there who will lend to provisional licence holders. And you do have some power. You can do several things to increase your chances of getting accepted for a vehicle finance deal with a provisional driving licence.

So read on, get clued up, and see if car finance with a provisional license is right for you and find out how to maximise your chances of acceptance.

 

Finance companies might only lend on a small car for provisional licence holders

Let’s imagine that you manage to get car finance as a learner driver…it might not all be what you expect it to be.

Unfortunately, many car finance providers restrict the type of vehicles you can drive. As you’re an inexperienced driver, most lenders will prefer you get a small economical car, like a supermini. Your chances of getting a Range Rover on a provisional license car finance deal are pretty slim.

However, that’s not a huge downside. We recommend a supermini for first-time drivers anyway: as they’re the best combination of affordability, safety, and ease of driving.

Finance companies will put a low cap on lending for provisional licence holders

Similarly to getting a smaller car, lenders will likely only lend a certain amount to you. Many lenders offering provisional drivers car finance will have a lending limit of £10,000 – £12,000. While this is still a good chunk of money, it does mean that you’re not going to be able to get a new car.

We’ve seen some lenders offer a limit as low as £7000. But again, we don’t see this as a big downside. For even £7000, you can get an excellent used car on finance. It’s not worth spending big on your first car, as you’ll still be learning!

The APR (annual interest rate) might be high for provisional license holders

Of course, the biggest factor in car finance is the price! Unfortunately, far fewer lenders that provide car finance are willing to offer you a provisional car finance agreement. And so the market is small, and the annual interest rate is higher.

So, your APR cost – which is the interest you pay on the finance, plus any other charges – will be higher. Meaning that your monthly repayment rates will be higher than if you had already passed your test. It’s worth getting a quote, and if it seems unfeasible, it might be worth waiting until you’ve passed your test.

Provisional car finance lenders might want a big deposit

I know…when do the costs end?!

Even if the APR is reasonable, you’ll likely have to put down a deposit. Now, this is often the case when you’ve passed your test too. However, there are quite a few zero-deposit car finance deals out there. But as a provisional licence holder, it’s doubtful you’ll qualify for any of these.

It’s likely that you’ll need to put down at least a 10% deposit: so an initial payment of around £700-£1200. You can put down a bigger deposit if you want. The benefit of paying a deposit will significantly reduce your monthly payments.

Finance providers, look at how long you’ve held your licence

When you apply for your provisional license, you’ll likely want to pass your test and get the full license ASAP.

However, sometimes life gets in the way. Money gets tight, and you can’t afford lessons. Or maybe you go to university in a very car-unfriendly city. Whatever the reason, it’s common for people to have provisional licenses for a long time.

Unfortunately, finance companies will look negatively at this. We’ve seen some lenders reject provisional licenses that are more than five years old. So if you have held your provisional for a long time, it could be worth just seeing it through and getting the test passed before you apply for car finance.

Car Finance Provisional Licence Questions: why age is important

You’ll need to be 18 for a provisional car finance license. As we mentioned, earlier this can seem confusing – as you can pass your test at 17! However, UK law requires you to be 18 years old before applying for any finance. And, of course, that includes a car loan!

One other huge factor about provisional car finance is that most people applying are young. This stereotype makes lenders even more hesitant to lend. That’s because younger provisional license holders likely don’t have much credit history or evidence of stable employment.

If you have a provisional license holder and are older, your chances are significantly higher. While you will likely have some restrictions compared to someone who’s passed their test, it won’t be as severe as younger (potential) drivers.

Can I get a car loan with a provisional licence if I’ve already been approved for insurance?

If you have insurance confirmed already on a parent’s car, it might increase your chances of approval. However, if you’re an additional driver, it won’t impact your score too much. Any benefits will likely be fairly minimal.

Guarantor car finance: an option for provisional licence holders finance providers

When looking for a personal loan, it seems tempting to go in alone. You want it to be your car. However, this might not always be possible, especially if you have a poor credit rating, and applying with a guarantor will significantly increase your odds.

A guarantor is someone who co-signs the agreement with you and acts as a backup if you can’t make your car loan payments. Usually, this is a parent/guardian or someone very close to you. Of course, they also need to have a good credit history and a stable income.

So even if you have poor credit, you’re still likely to secure car finance from at least one lender who will offer you a deal – if you have a guarantor. Remember, these lenders want your business, and they want you to succeed in your application.

How to maximise your chance of getting car loan with a provisional

 So, you’ve gotten this far and remain set on getting car finance with a provisional license. Here are some tips to maximise your chances of being successful. Remember, even doing all of these steps doesn’t guarantee you’ll get a finance deal. But it’ll give you the best shot possible!

Go for Hire Purchase rather than PCP finance

A hire purchase (HP) pays off the car’s full value (plus interest) over a set amount of time – usually between 2 and 5 years. Meaning at the end of your contract, you’ll own the car.

A personal contract purchase (PCP) is slightly different. Basically, you pay monthly payments for a set amount of time (again, usually between 2 and 5 years). The difference is at the end you’ll make a payment on the guaranteed value of the car this is usually a few thousand pounds. However, the upside of this is that your monthly repayments are lower than for HP.

So what one is better for provisional license holders looking for a car finance deal?

We recommend a hire purchase deal because you’re paying off the value of the car. Overall, your outstanding finance balance will drop faster, and you’ll pay less interest. More importantly, lenders see HP as a lower risk, as it’s a more basic contract agreement. Your chances of success are much better with an HP when compared to a PCP.

Can I lease a car as a provisional license holder?

Leasing a car is essentially a long-term rental. You pay a deposit and a set amount each month for the contract term, and at the end of the contract, you give back the car. There isn’t and will never be an option to own it.

The upside is that lease deals have the lowest monthly repayments. Due to this, the lending criteria can be quite a bit stricter and require a good credit rating, and it’s really unlikely that you’ll get a car lease deal with a provisional license.

Can I take out a joint application as a provisional driving licence holder?

Don’t get it twisted – a joint application is not the same as a guarantor. On a guarantor agreement, you are the sole debtor. On a joint application, then both of your names are on the contract as co-debtors.

A joint application can be helpful and increase your chances of approval you’re not relying solely on your credit history. The only caveat is that the joint applicant must be someone who lives at the same address as you. More often than not, this is a parent or guardian who lives with you – and you’ll want them to have a full driving license!

Summary

Getting a car finance provisional license is tough: but possible. As always, remember that interest rates will vary depending on your exact circumstances and the lender. When combined with your monthly insurance payments, you might find that the repayment is higher than you’d like.

However, by applying through YoungCarDriver, you gain instant access to the very best car loan deals available today, enabling you to find an affordable package based on your circumstances.

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