Can I Get Car Finance with a Provisional Licence?
Can I buy a car on finance with a provisional licence?
Surprisingly, a key question amongst drivers holding a provisional licence is can a learner driver get car finance? We propose to answer that question.
Achieving your full driving licence can be challenging.
Applying for car finance for your wheels when you haven’t passed your test can be even more challenging.
Unfortunately, far fewer lenders offer car finance with a provisional licence. So the borrowing cost is usually much higher than with a full licence.
Those accepted for provisional driver finance will have stricter borrowing limits and increased APR with higher monthly repayments. Likewise. There might also be a limit on the sort (or size) car you’ll be eligible to finance.
It’s not all doom and gloom, though. Some finance companies out there will lend to provisional licence holders.
You can do several things to increase your chances of getting accepted for a provisional car finance deal.
So read on, get clued up, see if car finance with a provisional license is what you want and find out how to maximise your chances of acceptance.
Why is age important with provisional licence car finance?
UK law states you must be 18 or over to sign a finance agreement. You’ll have to wait if you’re 17 and have just got your provisional licence.
Not surprisingly, most provisional licence holders are young. Their age often stops them from getting car finance, not because they hold a provisional licence.
Usually, younger drivers are likely to have less evidence of stable employment and income and short and dodgy credit history.
However, in your early 20s, things get a little easier. Hopefully, you’ve taken the chance to build a decent credit rating.
With a good credit score and affordability, young drivers can demonstrate that they can be reliable borrowers and lenders see them as less financial risk.
Your chances are significantly higher if you have a provisional license holder and are older. 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.
Finance providers, look at how long you’ve held your provisional 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 over 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.
Provisional finance lenders will often put restrictions on the car you finance
Many finance providers won’t entertain the idea of lending to learner drivers, as there’s no guarantee they’ll pass the test in good time.
Lenders that do offer provisional finance deem provisional licence holders a more significant risk as they haven’t passed the driving test. They follow strict rules about the car they finance.
Imagine that you manage to get car finance as a learner driver. It might not be what you expect it to be because lenders can impose restrictions on the car.
The type of car
Lenders want a learner driver in a small economical car, like a supermini. Getting a Range Rover on a provisional license car finance deal is pretty slim.
However, that’s not a huge downside. We recommend a supermini for first-time drivers. They’re the best combination of affordability, safety, and ease of driving.
Value of car
Similarly to getting a smaller car, lenders will likely only lend a certain amount to you.
Many lenders of provisional car finance will have a lending limit between £10,000 – £12,000. While this is still a good chunk of money, it means you’re probably unable to afford a new car.
We’ve seen some lenders offer a limit as low as £7000, but we don’t see this as a significant downside. For £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!
Of course, the most significant factor in car finance is the price!
The lack of competition amongst lenders willing to offer provisional licence car finance means the lending rate APR can be much higher.
Accordingly, with a high APR, the monthly repayment rates will also be dearer than if you had already passed your test.
Provisional car loans are notoriously expensive. The APR cost – the interest you pay on the finance, plus any other charges – will be higher.
It’s worth getting a quote. If it seems unfeasible, waiting until you’ve passed your test might be worthwhile.
Is a large deposit required for provisional finance?
When will the costs end?!
You’ll likely have to put down a deposit.
Although there are quite a few zero-deposit car finances deals available, it’s doubtful you’ll qualify for any of these as a provisional licence holder.
A deposit of at least 10% means 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.
Can I get a car loan with a provisional licence if I already have 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 credit score. Any benefits will likely be pretty minimal.
Can I get guarantor car finance as a provisional licence holder?
It seems tempting to go in alone when looking for a car loan. You want it to be your car!
However, this might not always be possible, especially if you have a poor credit rating.
Applying with a guarantor will significantly increase your odds.
A guarantor co-signs the agreement with you and is 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 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 you to succeed in your application.
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.
In a guarantor agreement, you are the sole debtor. On a joint application, 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!
What type of car loan is best? HP or PCP?
A hire purchase (HP) pays off the car’s entire value (plus interest), usually between 2 and 5 years. Meaning at the end of your contract, you’ll own the vehicle.
A personal contract purchase (PCP) is slightly different. You pay monthly payments for a set amount of time (usually between 2 and 5 years). The difference is that you’ll make a payment on the guaranteed value of the car at the end; this is usually a few thousand pounds. However, the upside is that your monthly repayments are lower than for HP.
So what type of finance is better for a provisional driver?
We recommend a hire purchase deal because:
- You’re paying off the car’s value.
- Overall, your outstanding finance balance will drop faster.
- HP should be cheaper.
- Lenders see an HP contract agreement as less risky than PCP
Your chances of getting an HP are much higher than 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.
The lending criteria can be stricter and require a good credit rating.
It’s doubtful you’ll get a car lease deal with a provisional license.
Summary – what to do?
Getting provisional car finance is challenging but possible.
Remember that interest rates will vary depending on your circumstances and the lender.
When combined with your monthly insurance payments, you might find that the repayment is higher than you’d like.
However, apply through YoungCarDriver, and gain instant access to the very best car loan deals available, enabling you to find an affordable package based on your circumstances.