Getting car finance as a student can feel like a slightly daunting prospect. You might need a new set of wheels, but you’re in the middle of studying for a degree while dealing with all the other challenges that come with university life.
Essentially, your car finance options as a student mirror those that you’re able to get when you’re not in full-time education too. First off, there’s Hire Purchase (HP), with which you make monthly payments over a period of time and then, once you’ve paid your final payment, the car is yours to keep or sell.
Then, there’s personal contract purchase, or PCP. This is more popular on brand new cars and your monthly payments essentially cover the car’s depreciation. Though there’s the option to make a large final payment to buy the car outright at the end of your term, most people choose to renew their contract on a new vehicle.
Finally, there’s the personal loan option. This would require you to secure a personal loan from a bank or lender, with which you then buy the vehicle outright. Your monthly payments then cover this loan, but the car is technically owned by you from the very start.
Why should I finance a car rather than buying it outright? - There are a number of reasons why financing might be a better option for students instead of buying a car with cash. For one, it might get you into a newer, safer car that won’t just be cheaper to run, but safer and less costly to insure, too.
Plus, a lot of cars bought from dealerships will come with a warranty, ensuring that you don’t have to worry about any potential mechanical issues down the road should they crop up.
What do I need to think about before applying for finance? - There are still a few hurdles to overcome when getting car finance as a student. A lot of students haven’t had a lot of time to generate a good credit history and this is something all lenders will take into account. Also, a lack of monthly income means that for many students, a high monthly payment won’t be realistic.
Many finance agreements require a deposit, too, so this is something to consider. Making sure you have a decent deposit can help to bring those monthly costs down.
Is there anything else to consider? - Before you leap into a finance agreement on a new car, it’s worth thinking about a few things. The first is crucial - budget. Remember, that a finance agreement only covers the cost of the finance itself, but there are other outgoings to consider. Fuel, insurance and road tax will all see your monthly outgoings increase, so make sure that you’re able to cover them. Getting this in line beforehand can avoid any potential disappointments further down the line.
It can also be a good idea to try and improve your credit score before applying for car finance. There are some simple ways to do this; register for the electoral roll, pay for a phone contact registered in your name on time or even have a credit card with very low payments - you’ll need to make these bang on time. All of this can help to increase your credit score and make you more attractive to lenders.
We can you help you every step of the way to getting your first finance agreement. With just a few steps to follow, you will be behind the wheel of your new car: