Young Drivers Car Finance

It’s important to know exactly what options there are available to you when applying for car finance as a young driver. But before we get into that, it’s crucial to understand exactly why young drivers find it difficult to apply for car finance. Some of the reasons include things such as:

• Young drivers are more likely to cause an accident – When you take on a car finance agreement, most of the time the car does not officially belong to you until the total amount has been paid off. Studies show that drivers under the age of 25 cause around 85% of all serious road accidents here in the UK, meaning that – to a potential lender – the lender’s insurance, the car, is more at risk when compared to older demographics known for safe driving.
• Young drivers don’t have much credit history – Financial inexperience will always be taken into account by a potential creditor. For young people, this can be an issue. The likelihood is that new and young drivers will not have a credit profile, so money management is difficult to assess through hard credit checks.
• Young people and students generally have less disposable income – People in their late teens generally earn around half the amount of people in their twenties – and students cannot take on full time work due to their studies. As such, your potential car finance provider will see this as a potential obstacle when it comes to your ability to make car loan repayments on time.

Overall, as frustrating as it may be, it’s hard to get past the fact that most lenders generally consider people between the ages of 17 and 21 to be less experienced and responsible, both when it comes to the driving and their money management.

When you set up a car finance agreement with a lender, most of the time they will continue to own the car until the loan is fully repaid with the final payment. As such, during the period until the complete payment, the lender can seize the car to account for any financial losses should you default on your payments. However, young drivers are statistically more likely to be involved in an accident or collision due to less driving experience and a perceived lack of driving skills compared to older drivers.

This can seem unfair to conscientious and responsible young drivers looking for a new finance deal, but it is unfortunately simply a part of being a young driver.

Young people in their teens who have just passed their driving test are unlikely to have ever taken out any form of credit or a loan, which means that there is no credit profile for potential lenders to check. Credit checks to assess an applicant’s reliability, strong credit history and money management cannot be performed on a young or new driver. Add to this the fact that people between the ages of 17 and 21 are likely to be earning far less and this casts doubt on your ability to keep making repayments on time.

Thinking about a personal contract purchase agreement as a young driver?

Another very popular car finance agreement is the personal contract purchase (PCP) agreement. This is similar to a hire purchase agreement in that you often make a small deposit, pay monthly instalments and own the car outright at the end of the term. However, there are some differences. The monthly payments made in a personal contract purchase are often lower than those made during a hire purchase finance agreement – but at the end of the term there is a one off balloon payment that must be made in order to retain ownership of the car. Otherwise, you will have to hand the car back or return it for part exchanges.

This is a good and flexible alternative to the hire purchase model for younger drivers who want to keep monthly costs down and to keep their options open. Monthly costs are lower, but the balloon payment to meet the full cost of the vehicle can be hefty and, if you aren’t sure you’ll be able to pay it but want to own the car, a hire purchase may be a better option.

Is a personal contract hire agreement right for new drivers?

If you want to have a car to use but are not as interested as paying to own a car, then a personal contract hire (PCH) car finance deal might be right for you. A personal contract hire is essentially a lease contract that means that you pay for use of the car, but do not buy it. The amount you pay is based on the depreciation of the car, so the model plays a big part in determining your monthly costs. You will also face mileage restrictions on a personal contract hire agreement too, or risk incurring additional costs. You will also have to be careful about general wear and tear throughout the hire arrangement. It is an increasingly popular option for young drivers whose main priority is getting on the road for employment or study.

Can you get car finance as a student?

For a lot of students, having a car is an absolute necessity. Whether it be for travelling between home and university, travelling to work or just generally getting about. But it can be difficult to afford a car when you are studying and cannot take on full time work. Fortunately, car finance for students is a very viable and affordable solution that gets you on the road. Even if you have no credit history, if you can prove that you have a regular income and can afford the monthly repayments, then you have a good chance of securing car finance.

There are certain things that you can do to improve your chances to get car finance as a student, such as:

• Getting a part time job – Getting a job alongside your studies is a great way of showing how you might be able to afford your monthly repayments. This makes you far more attractive to potential lenders for student car finance.
• Look for student car finance with a guarantor – As a student, you may find it easier to access beneficial student car deals if you have a guarantor providing that added financial stability.
• Improve your credit score – Coming to understand your credit score and what might affect it allows you to begin building a strong credit history for future potential lenders to see. This will help you beyond just car finance. Fortunately, we have some great resources to help you improve your credit score here at ChooseMyCar.

One thing that is very important to remember is that you cannot use your student loan income to pay for car finance. Your student loan is given to you in order to cover tuition costs and living expenses and you won’t be able to use this to pay for car finance in any situation.

Can you get Car Finance at 17?

Unfortunately, it’s almost impossible to get a car on finance when you’re 17. Most lenders won’t consider lending to someone under the age of 18, for a number of reasons. At this age, you’ll likely have to make do with any savings you have or else the generosity of others, such as a gift or loan from a parent.

Can you get Car Finance at 18?

Once you turn 18 things look a little rosier. While your credit score is still likely to be low as you will have no credit history, lenders are more likely to look kindly on your situation.

While we’d still recommend spending time building up your credit score, there’s still a good chance that a lender will give you a car finance deal even with no credit history as long as you can prove that you can you have a regular income and can make the monthly payments. This means either having a job or potentially a guarantor as discussed previously.