There are a number of reasons why you may need a car as a student. Whether you’re going home for the weekend, getting to and from lectures or going to your part time job, having a car to get around may be the best option for you! If you can’t afford to buy a car outright, you could consider getting a car on finance. Car finance allows you to spread the cost of owning a car into affordable monthly payments, which can be perfect when managing your money!
Things to consider before student car finance:
Whilst it is possible to get car finance for students, there are a few things you should consider before you start applying.
- Deposit contribution. Some car finance agreements require you to put a deposit down at the beginning of the agreement. It can be hard to find a large lump sum to put down but even a small deposit can help to make your car finance deal more affordable.
- Credit history. Most lenders will require a soft search credit check to be performed on your credit file before they accept you for finance. Lenders consider how likely you are to pay back your car finance based on your credit history.
- Monthly income. An affordability check allows lenders to see if you can afford to pay back your car finance and can determine how much they will loan you.
How to increase your chances of getting car finance as a student?
Get a part time job
It’s not recommended that you use your student loan to fund your car as it should be used on living expenses and studying costs. However, having a more regular and reliable income from a part time job can help to make car finance more affordable and help you get approved. Lenders will usually ask to see 3 months’ worth of bank statements, so it is recommended that you get a regular income for a few months before you start applying.
Build credit if you have none
If you’re a student between 18-21 it is possible to get a car on finance, but you may have little credit history to show. If you are applying for car finance no credit history, you could consider building credit before you apply. It can be as easy as getting a mobile phone contract and paying it off on time and in full each month. If you don’t currently know what your credit score is, you should get into the habit of checking it on a monthly basis and see how your score improves!
Work out your budget
When you apply for car finance you will usually be asked how much you can afford to pay each month. It’s important that you don’t borrow more than you can afford to pay back, and you should choose a budget that is affordable and realistic. You should also factor in the cost of car insurance, fuel, road tax and any servicing or unexpected repairs. If you’re a young driver, costs of insurance can be very high and can differ massively depending on the car you want. It’s best to explore different makes and models and also check insurance quotes first.
Joint car finance application
If you’re struggling to get approved for finance on your own, you could consider a joint car finance application. Joint car finance is when two people apply for finance on the same vehicle and you could out take a joint application with a parent or guardian. From a lenders point of view, they have more security that the finance will be paid back as both parties are responsible for meeting the repayment deadline. If you both fail to pay, both of your credit files can be negatively impacted.