Students may have more limited options when it comes to cars because they are younger, have less driving experience and may only have a small budget. So, if you’re looking to get a car as a student, read the most common ways to buy and also some top tips on making car finance more accessible to young drivers.
Ways to buy a car:
Cash.
The best and most cost-effective way to get a car is with cash. This is because you’ll have to freedom to buy from a private seller or a dealer, you can haggle the cost more easily and there will be no monthly payments or interest to pay. However, as student with a limited income, it can be hard to save up enough cash to buy a car outright. A good, reliable car can cost a few thousand pounds even when buying second hand and many students also don’t have the luxury of asking their parents to help them. If you’re in this situation, you may be looking to explore car finance to help you.
Personal Loans.
A personal loan is a form of car finance but unlike some, the loan isn’t secured against the vehicle. Personal loans can be better because you can purchase the car just like a cash buyer by borrowing money from a lender to purchase it. You’ll then pay the lender back over the agreed term each month. If you’re a student with limited income or a thin credit report, it can be harder to get approved for a personal loan or you may face higher interest rates.
Hire Purchase.
Hire purchase car finance is one of the most straightforward deals you can get. It is a secured loan which means the lender buys the car from the dealer on your behalf and you pay the lender back over a number of years. Your monthly payments and interest will be split equally over the term so once all payments and the final option to purchase fee has been paid, the car had been paid off and it’s yours to keep. You will need to search around for the best car finance companies who can help students first though and try to avoid any who are trying to charge sky high interest.
What to consider before buying a car:
Stick to your budget.
Even if you’re buying a car with cash or finance, you should always set a realistic and affordable budget and then stick to it. When shopping for cars, it can be easy to get carried away with stretching your budget and adding on optional extras at the dealership. However, doing so may leave you out of pocket in the future. It can be especially problematic if you have a car on finance and it’s a secured loan as the lender would own the car and has the right to take the car away from you if you fail to repay.
Check your credit score.
Credit scores are important when you are trying to get a car with finance or a loan. Lenders run a credit check when you apply for finance to see if you’ve had credit before and how you’ve paid it back. As a young person, you may have a limited credit history due to not having much opportunity to build credit before. This could see you have a bad credit score, and lenders may be put off as they can’t predict which type of borrower you will be. If your credit score is low, you could consider building a small amount of credit in your name, this can be as easy as getting a mobile phone contract and paying for it each month on time and in full.
Consider a joint application.
If you’re struggling to get approved for car finance on your own, you could consider a joint application. A joint application is when two people apply for finance on the same car and work best with a parent or partner. A joint application can be handy if you can’t get approved on your own and need to instil more trust with the lender. Both parties are responsible for paying back the loan but it means the lender essentially has two chances for the loan to be repaid.
