For students and young drivers who want to gain independence or lead a busy life, securing a car can be a big step. But, many younger buyers have limited credit history and finding accessible finance options can seem impossible. Luckily, CarMoney UK provides flexible car finance to young people, including students. This article looks at several finance options, including co-signer loans and student discounts, that are meant to make buying a car easier for younger buyers.
Understanding Car Finance for Young Buyers
Securing car finance is intimidating for students and young drivers. Many young people may not have a good credit history that banks and lenders look for. But there are a few ways to bridge the gap and get affordable car loans.
Co-Signer Loans: A Helping Hand
For younger buyers, a co-signer loan is popular. This arrangement sees a person with a stronger credit history, ideally someone like a parent or guardian, agrees to co-sign the loan. If the primary borrower doesn’t make any payments, the co-signer is responsible for the loan, adding more security for the lender.
Benefits of Co-Signer Loans
Approval becomes easier with a co-signer, which also increases the probability that you will be approved with limited or nonexistent credit history. Additionally, co-signing a loan can also help improve the loan terms for the primary borrower, with a lower interest rate and more favorable terms. Moreover, by successfully paying the loan, you also create a positive credit history that will serve as an advantage for the future financial expectations.
Potential Drawbacks
The downside of shared responsibility is that if you don’t make payments, your co-signer is responsible for the debt and that could strain relationships. A missed payment can also hurt your credit score and your co-signer’s. Also, there is the emotional pressure to make timely payments, knowing that your financial decisions directly affect someone else.
Student Discounts on Car Finance
Special student discounts are available from many car dealerships and finance companies, making it easier for younger buyers to get a vehicle at a lower cost. Students who meet some criteria, like being enrolled in full time education, often get these discounts.
Advantages of Student Car Finance Discounts
One of the biggest benefits is lower interest rates, which can reduce the overall cost of the car. Flexible payment terms are another advantage, as some lenders offer deferred payment options or lower monthly payments to accommodate a student’s budget. Student discounts can help young drivers avoid the need for a co-signer, qualifying them for financing on their own and making the process much easier.
Things to Keep in Mind
Student discounts vary by lender so it’s important to check the eligibility requirements. The second consideration is that some discounts may only apply to a limited selection of models or brands, so you may be limited in your options. Furthermore, although you may get a discount on the car, other expenses such as insurance or registration fees may stay the same or even increase.
PCP and HP: Ideal for Young Drivers
There are two common car finance options for students and young drivers – Personal Contract Purchase (PCP) and Hire Purchase (HP). Both have different terms, but both can be great ways to make car ownership more affordable.
Personal Contract Purchase (PCP)
PCP allows you to make smaller monthly payments over a fixed period of time, and then either return the car, pay a balloon payment to own it or trade it in for a new vehicle. If you like driving a new car every few years, this is the option for you.
Hire Purchase (HP)
HP means that you can pay the car off in fixed monthly payments over a fixed period of time. After you have paid all payments, you own the car. Monthly payments are higher than PCP but there is no balloon payment, the car is yours when the loan is paid off.
Considerations for Young Drivers
Before deciding which car finance option to go for, young buyers should take into account several factors to make sure they choose the best deal for their financial situation.
Budgeting for Car Ownership
Make sure to take into account all the costs of owning a car, including insurance, fuel, maintenance and taxes. Budgeting these expenses will help you know how much you can afford to pay each month.
Building a Credit History
If you don’t have a good credit history, but you take out a car loan and pay it off regularly, it will help you develop a good credit score. This will make it easier for you in the long run whenever you require additional financing.
Final Thoughts
Finding car finance as a student or young driver can feel off putting but many lenders offer tailored options to help you get on the road. You can choose a co-signer loan, take advantage of student discounts or explore PCP and HP to find a solution to suit you. You can make an educated decision on whether to buy or lease a car by looking at your budget, looking at deals, and understanding your long term goals, so it can be a dream to own a car without financial stress.