Car finance for students

Whether it’s getting to lectures, doing a big shop or driving home to see your family, a car can help make student life more practical and enjoyable. 

But, cars can be expensive to buy upfront, especially if you’re on a tight student budget. If paying upfront isn’t realistic, student car finance could help you spread the cost into more manageable monthly payments.

In this guide, we’ll explain how to get car finance as a student works, who can apply and what you could do to boost your chances of approval.

Can a student get a car on finance?

Yes, it’s possible for a student to get car finance, but they must meet lenders’ criteria. You won’t be automatically turned down for being a student, but you have to show you can comfortably make your monthly payments on time. 

Most lenders will look at things like:

• Your income

• Your job

• Your monthly spending

• Your credit history

Students who haven’t built up a good credit score yet may struggle with traditional lenders. At Car Finance 247, we work with trusted lenders who could provide student car finance and car finance for young drivers. They’ll look at more than just your credit score, but assess your current and historical finances to see whether you’re eligible to borrow. 

How student car finance works

Car finance for students works just like any other car finance application. You’ll start by filling in our easy online form with details about yourself, your income and the amount you’d like to borrow.

If you’re eligible, you can then start looking for a car that fits your budget and choose a finance option that works for you. We use a soft search to give you a quote. If you proceed, a hard search will be conducted which may impact your credit score. 

Our lenders offer two different types of student car finance:

• Hire Purchase (HP): With HP, you simply pay off the price of the car, plus interest, over an agreed term. It usually has higher monthly payments than PCP, but you’ll own the car at the end of the agreement once all payments are made and you say the “option to purchase fee”.

• Personal Contract Purchase (PCP): With PCP, you also pay in monthly instalments, plus interest. But you have three options at the end: keep the car, trade it in or return it. It usually has lower monthly payments, but you have to pay a large ‘balloon payment’ if you want to keep it.

Your deposit and loan term may affect your repayments. A larger deposit could reduce your monthly payments because you’re borrowing less overall. Spreading the cost over a longer term could also lower monthly repayments, but you might end up paying more interest overall. 

Use our car finance calculator to get an idea of what you might pay.

What do you need to apply for student car finance?

When applying for car finance as a student, you’ll usually need:

• Proof of ID

• Proof of address

• A UK bank account

• A UK driving licence

• Proof of income or employment

Having a regular income could help your chances because it shows lenders you have consistent money coming in to pay back your loan with. That could be from part-time work around your studies, as long as you can show affordability.

Can students get car finance with bad credit?

Getting approved for student car finance can be harder if you’ve got bad credit, but it doesn’t always mean finance is impossible.

There’s a difference between having bad credit and having little or no credit history. A lot of students simply haven’t borrowed before, which means lenders have less information to work with.

If you’ve missed payments in the past or have defaults or CCJs on your credit file, some lenders may see you as higher risk. In those cases, you could:

• Be offered a higher interest rate

• Need a bigger deposit

• Have fewer finance options available

• Need a guarantor

Affordability is still one of the biggest factors. Choosing a cheaper car with lower monthly payments may improve your chances. Credit is subject to status and eligibility.

Tips to improve your chances of approval

There are a few things you could do to help strengthen your application and make it more likely for lenders to approve you:

• Save for a deposit – A bigger deposit means you’ll borrow less. This could lower your monthly payments and make lenders more likely to approve your application.

• Use a guarantor – A car finance guarantor is often a parent, family member, or someone with good credit. They agree to cover the repayments if you can’t. This could help reassure lenders and make them more likely to accept your application.

• Choose an affordable car – Applying for a car with high monthly repayments could make approval less likely, especially if you’re on a student budget. Choosing a cheaper car with lower running costs may improve your chances.

• Build your credit history – If you’ve never borrowed before, lenders may have limited information about how you manage money. Things like a phone contract could help build your credit history over time, as long as you keep up with repayments.

• Register on the electoral roll – This helps lenders confirm your identity and current address. It could also help to improve your credit score too so it’s worth doing.

Read our guide on what lenders look for when approving car finance, for more information.

Things to think about before financing a car

Before taking out student car finance, think about whether you can afford to make the monthly repayments every month, even if your circumstances change. It’s a good idea to think about your short and long term finances before committing.

It’s also crucial to think about the other costs of running a car that can wrack up. These may include:

• Insurance

• Fuel

• Road tax

• Servicing and MOTs

• Parking permits

• Tyres and repairs

Insurance in particular can be expensive for younger drivers, so it’s worth checking quotes before choosing a car.

The takeaway

So, can you get car finance as a student? The answer is yes, you could. Getting car finance as a student is possible, but it comes down to affordability. Lenders will look at a range of factors such as your income, credit history and monthly spending to decide whether repayments are manageable.

If you’ve got a steady income, have built up a bit of credit history and put down a deposit, your chances of approval may improve. Using a guarantor could also help to boost your chances, as this reduces the risk you pose to the lender. 

With car finance, you spread the cost of a car over time. But remember to be realistic about what you can afford, and to factor in the full cost of running a car, not just the monthly finance payments. 

Disclaimer: Car Finance 247 Limited is a credit broker, not a lender. Finance is subject to status and affordability. Terms and conditions apply.