Student Car Finance

The first thing that many teenagers want to do when they reach 17 years old is learn to drive. It's the legal age limit you can get behind the wheel of a car and brings freedom and flexibility with it.

At 18, many people will go off to university, giving them even more freedom than they likely would have had previously. Some are lucky enough to be able to afford - or even be gifted - a car once they've passed their test, while others have to use their parents' or wait until the time comes that they can afford it themselves.

Having a car at uni allows students to drive to and from home now and again without having to rely on public transport or parents to pick them up. It can be handy to have one if you have a part-time job in the town or city you are studying.

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However, a car is a significant expense, especially at that age when students are relying on loans and low-income jobs to be able to live, study, and have a good time. For some, though, a car is critical to be able to do everything they want, when they want.

If a student can't afford to buy a car with cash, car finance is an option. Some lenders will only offer to those aged 21 and above, with a steady income and good credit score, though it is still possible for those that don't meet that criteria to get an agreement.

Student car finance and credit history

Credit history is something that we all have; it's every financial situation we've been in on record, such as opening a new bank account, taking out a mobile phone contract, or subscribing to a streaming service such as Netflix or Disney+.

It helps lenders understand how trustworthy a borrower is, alongside information such as an address, salary, and employer's details.

Keeping your credit history in check gives you an advantage when applying for loans and helps to prove that you can afford to make the repayments. It's worth downloading one of the many credit apps to keep yourself updated on where you are and how you can keep improving it.

Electoral roll

One of the many ways to help boost your credit history and make yourself more desirable when taking out a loan is ensuring you are on the electoral roll; it proves you have the right to vote and have a fixed home address. 

As a student, registering your student address while also having your home address will help your loan application.

Income and expenses

Before applying for a loan, it's critical to weigh up the income you take home each month and how much additional things like petrol, MOTs, services, insurance, and tax may set you back.

There's no point getting a loan and then realising you can't afford it amongst the other things to pay for each month. As a student, any disposable income you have you'll want to use wisely.

While your student loan is there to help you live, it is not there to help pay for a car, so be sensible with your finances and ensure you're only paying and taking out loans that you can afford comfortably.

Budget

Like your income, you should understand the amount of money you wish to spend and how much you're happy to part ways with each month as part of your repayment plan.

To buy a car on finance, you will need to put down an initial deposit plus the fixed monthly repayments across a fixed term, which can be between 12-60 months, depending on the type of loan.

Going back to insurance, being a young driver means you have less experience and, unfortunately, more chance of being involved in an accident or causing damage to your car.

It's worth researching and looking for quotes from multiple insurers before getting an agreement. Over time, your insurance will reduce in price, but initially, you should expect it to be a significant amount of money that needs to be budgeted and accounted for.

Get a part-time job

A part-time job at uni is a great way to bring in some extra funds so that you're not solely relying on your student loan to get you through the three (or more) years of study. 

A lender will be more likely to grant you a loan if they see you are bringing in extra income than just your student loan. It also generally helps improve your experience and understanding of money and finances.

You may not be able to find a brand new Audi Q7, but there are plenty of older, used cars that you'll find a good deal on and possibly pay as little as £100 per month.

Have a guarantor

To improve your chances of being approved for a car finance loan, you could have a guarantor who agrees to continue making payments on your behalf if you cannot afford them for whatever reason.

A guarantor will usually be a parent or close relative with a good credit score, sustainable, healthy income, and ultimately be in a position to help you with money if necessary.

Applying with a guarantor in place could give lenders extra confidence that they will get their money back and are not just putting their faith in a student with little or low income.

Car finance as a student summary

It is possible to buy a car on finance if you're a student. The application process may not be as straightforward as if you were a few years older with savings, a good credit history, and a steady income behind you, but it's not as unlikely as it may seem.

There are many car finance options available, and it's worth doing your research to determine whether a Personal Contract Purchase (PCP), Hire Purchase (HP), Personal loan, or Personal Contract Hire (PCH) is the right choice for you.

At the end of the day, if you can prove that you can make your repayments on time, have a good credit history, and have a guarantor, you give yourself a much stronger chance of being approved.