Car Finance for Young Drivers

You’ve done it, you’ve finally passed your test. After months of driving lessons, you’ve learned your theory and negotiated your driving test. Now you just need to put everything you’ve learned to use, and for that, you’ll need to get your own car.

For young drivers, this can sometimes be easier said than done.

As a young driver, it can be hard to find the right car. Having to juggle the need to keep it reliable, safe, cheap to insure, aesthetically pleasing and affordable to run can be a difficult task. Adding the reluctance that some lenders or dealers have with allowing young drivers car finance deals can make it particularly difficult for them to get hold of their first car.

Buying a used car can often be the best way to make car ownership a reality for young drivers. Using car finance for a used car can make it even more affordable. Being able to pay off the cost of a car in small monthly installments can make it manageable. Once lenders have checked to make sure that you are able to meet the payments, you’ll be good to get a young driver car finance deal. Used car finance is the best choice for many, not just young drivers, as it’s a great way to keep costs down.

Hire Purchase and Personal Contract Purchase for Young Drivers

Hire purchase (HP) and personal contract purchase (PCP) agreements are the most popular forms of car finance. Both will include making monthly repayments and usually a deposit. In some instances, however, there may be no-deposit or else a very small one.

Hire Purchase Agreements for Young Drivers

This will divide the cost of your car into monthly repayments. At the end of the term, the car will be yours, but you don't own the car outright until then. If you go over your mileage allowance you could be charged more. Find out more about hire purchase agreements for young drivers here.

Personal Contract Purchase Agreements for Young Drivers

As you don’t automatically own your car outright at the end, monthly costs can be lower. You do have the chance to pay a balloon payment at the end of your term though. For more information on Personal Contract Purchase agreements for young drivers visit our PCP page.

Using Guarantors for Young Drivers Car Finance

As many young drivers haven’t spent time building up their credit score or may be studying or working part-time, being able to prove that you can meet monthly repayments could be tricky. Using a guarantor for car finance can help reassure lenders that your payments will be covered. A guarantor will be able to help you by covering any payments that you may miss, so if you have a bad month for shifts, or something else gets in the way, you’ll never miss a payment.

In many cases, the guarantor won’t need to be called upon at all, other than for the paperwork at the beginning of the agreement but, if the worst does happen and for some reason you can’t make a payment, they’ll be able to step in and stop that from happening. Your guarantor must be over 21 and have a good credit score. Usually a guarantor would be a parent. Someone like your spouse, who is linked to you financially, is automatically ruled out.  

It’s important to note that if both you and your guarantor miss a repayment then both of your credit scores will be negatively affected and, in some circumstances, you can both be taken to court.

Car Finance for 17-year-olds

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.

Car Finance for 18-21-Year-Olds

Once you turn 18 things look a little rosier. While your credit score is still likely to be low, 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 as long as you can prove that you can make the monthly payments. This means either having a job or potentially a guarantor as discussed previously.

Understanding Car Finance as a Young Driver

There’s a lot to learn about car finance and we have a whole host of extra content for you to sink your teeth into. If you simply want to see what you can afford, then go to our car finance calculator or apply now for the best deals on car finance. 

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Frequently Asked Questions

Guarantors will have to undergo a credit check at the same time as the borrower. This is done to make sure that they are in the right situation to be making any repayments if they are called upon, and the lender will want to see that they are reliable.

The length of a car finance agreement will vary for a number of reasons. The overall length of a term is usually measured in 12 month increments. 

These terms usually start with a minimum of 24 months (2 years) upt to a maximum of 96 months (8 years). Generally terms for used cars are shorter than those for long cars. 

While the monthly repayments will likely be lower on a longer term plan, it’s worth working out how much interest you’ll pay if you opt for something over a longer period of time.

It is possible to get car finance with bad credit. Many lenders provide loans and finance options specifically for people with bad credit.

Personal loans can be a great car finance option if you have bad credit. And a guarantor loan may help you avoid higher interest rates; this is where a friend or family member co-signs the loan, agreeing to meet payments if you're unable to.

With pre-approval on a personal loan, you can walk into the dealership like a cash buyer. You can be in a better position to negotiate on price. And you can avoid the stress of the finance office.

Your credit file is checked if you apply for car finance. And you'll usually have to provide proof of ID, address, and income. The specific documents you'll need ultimately depend on the finance provider you go with.

Providers will check your credit score when you apply - initially via a soft search. They'll perform a hard credit check if you choose to enter into a contract with them. Most lenders will need to see your driving licence - full or provisional. You may also be asked to provide:

  • Your passport - for proof of ID
  • Utility bills or council tax letters - for proof of address. These usually need to be dated within the last three months.
  • Payslips - for proof of income and to make sure you can afford the payments. Some providers may ask to see a few months' worth.

While it’s not ideal, there are circumstances that may occur that stop you from making a payment.

If you are unsure about your ability to make an upcoming payment we would recommend contacting your lender. This way there may be something that can be worked out before the payment is missed.

If you’ve already missed your payment, and can afford to make it, contact your lender as soon as possible to make the payment. You may incur a late fee, but making the payment can stop anything else from having.

If you continue to miss payments there is a chance your car could be repossessed and you will still owe for missed payments. Your credit rating will also be negatively affected.

A guarantor loan is different from other loans in a couple of ways. First of all, they include a third party. That third party will be someone you know who will act as a guarantor and will make any of the payments you miss. Secondly, guarantor loans are generally unsecured, meaning they aren’t placed against an item, like the car in a car finance agreement, so the car is unlikely to be reclaimed if a payment is missed as the guarantor will step in and make it.

Yes, you can get car finance using a guarantor. Having a guarantor may make a lender more likely to accept someone with bad credit or no credit history as a borrower. This means they can be a good option for people in these situations. 

While a guarantor can help someone who has bad credit get approved for car finance, they themselves cannot have a poor credit score.

While it’s not uncommon, and often preferred by lenders, for a guarantor to be a homeowner, it’s not essential. They could be a renter or even live with their parents. The important thing is that they can prove that they can afford to make any missed repayments.

Having a guarantor can help you to get a loan when you otherwise may not have been able to, i.e. when you are a young driver, self employed or have bad credit.

Lenders may look more kindly on someone in one of these situations if they have a guarantor so they know that there’s less chance of a missed payment.

Read our guarantor loan guide.

A guarantor is someone that will meet payments if you miss one. They are usually a parent, but can be anyone not directly linked to you financially, i.e. you can’t have a joint account with this person.

Read our guarantor loan guide.