Car Finance Options for Students
As a student, you probably already have a lot on your plate, including expenses that you might not always be able to afford. So, instead of taking on another part-time job or asking your parents for money, you can look into car finance for young drivers.
Getting your first car is always an exciting experience. Unfortunately, there are many aspects of it that can be overwhelming, especially when you’re not used to spending large amounts of money or making such big purchases.
Thankfully, there are car finance options for students if you know where to look and what steps to take to get the financing you need. With that in mind, let’s take a look at a few of those options so you can learn more about getting the car you’ve always wanted, and hitting the road!
Save Your Money for a Solid Down Payment
If you’re wondering, “can I get car finance as a student?”, the answer is yes. One of the easiest ways to get started is by saving up your money for a down payment. That will give you a wider variety of finance options, plus you won’t have to finance as much, because you’ll be putting some money down and lowering the amount you’ll need to borrow.
It’s not always easy to save a lot of money when you’re young, so don’t be afraid to get creative with how you make that money and how you save it. If you’re really desperate for a car, you might have to get an extra part-time job or do extra things around your home for an increase in allowance.
If you’re worried you might spend your money right away, it can be a good idea to open a savings account at your local bank, or have your parents hold onto the money you’re saving so you’re not tempted to spend it on other things.
A good rule of thumb for a down payment is to save about 5-10% of the car’s total cost. Not only will giving a down payment lower your monthly cost of the car, but it could even improve your interest rate.
Utilize a Co-Signer/Indemnifier
Having a steady income is something lenders will look for when it comes to car finance for students. But, if you’re going to classes and involved in extracurricular activities while trying to maintain some kind of active social life, you may not be bringing in a consistent income every week/month.
Even if you have a part-time job, but you can’t always rely on a specific amount coming in, one option is to have a co-signer with a steady income to help you to get the financing you need.
A co-signer is usually someone with a full-time job that can show a good credit history to the lender. They also need to be willing to vouch for you and ensure the lender that you’ll be able to make your monthly payments on the car.
Keep in mind that if you do use a co-signer, they’re taking on the responsibility of your payments if you don’t make them. So, it should be someone you trust, but it also needs to be someone who trusts you. If you fall behind on your payments, they’re the ones who will have to pay, so it’s important to make sure you actually do have enough money to cover your monthly bills before asking someone to take that risk for you.
Budget Your Other Expenses
It’s important to be realistic about buying/financing a vehicle when you’re a student. While you might have your heart set on something specific, you need to factor in your other expenses to determine what type of vehicle you can really afford. Some of the most common expenses to consider while you’re putting together your budget include:
- Utility bills
- School supplies/books
- Car insurance (full coverage)
- Gas money
- Emergency funds for maintenance on a car, etc.
As you can see, just having a car brings extra expenses that you can’t forget about. So, don’t over-exert yourself to make monthly payments on your new car if you can’t afford the insurance or gas to go with it!
Think About Refinancing
You won’t be a student forever. Once you graduate, your financial circumstances will likely change. It will be easier to get a full-time job and you might not have some of the expenses you did as a student.
You can talk directly with your lender about lowering your interest rate and refinancing. Or, you can start shopping around for a different lender who is willing to give you a better rate. In some cases, you may be able to cut your monthly payments in half when you refinance.
Is Car Finance the Best Option?
Some people will argue that financing puts you in debt, but when you’re a student without a steady stream of income, financing is often the best option that will allow you to have a car without spending thousands of pounds upfront. You’ll want to make sure to get a vehicle that is safe and reliable, so you’re not stranded on the side of the road or putting more money into maintenance than it’s worth. But, you also don’t have to break the bank with the newest car to hit the market.
Once you’ve secured financing, you can start looking at cars that fit your needs and your sense of style. So, don’t believe all of the negative stereotypes you might hear about car financing for students. It can get you in the driver’s seat faster and gives you the option to pay what you can until you’re able to work full-time.