Financing A Car: Is It A Good Option For A Uni Student?
You’ve got your driving licence and freedom awaits you. The only problem is, you’re moving away from home, or have just moved away to university and you don’t have your own car yet.
What should you do? Should you look to buy a new car for your university home, or wait until after university? There are a few things to consider, and there are a few benefits too.
Learning how to budget as a student is an important part of growing up and looking for car finance for students will be a big part of this should you seek out a new car to drive at university.
If you’re wondering whether financing a car as a student is a good option, you should check out our full guide!
Reasons Students Need A Car
There are a few reasons why a student might want or need a car when living at university.
For some, it gives them easy access to travel to and from university, especially if they do not live anywhere near campus – this isn’t the case with our student apartments of course!
For others, a car provides great independence in terms of being able to take a part-time job easily, even if the job role is slightly out of town.
Other students might have mobility issues and a car provides an extra level of freedom and independence where a person might not want to rely on public transport or others to get to and from university and other aspects of their life.
A car also provides a student with a way of travelling back home to visit family and friends, or to go away for weekends in other parts of the country with ease.
Thinking About Your Budget
It doesn’t matter what reason you have for wanting a car, as a student you really need to think about your budget.
It is wise not to spend your entire budget on a car, especially if you do not need a car.
Your student loan is designed to help you to cover the cost of your tuition fees, student accommodation, and living expenses.
If you spend your loan or savings in one go on a car, how are you meant to survive the rest of the year?
What Is Car Finance?
Car finance is an agreement between you and a lender that helps you to pay for a car over a period of time rather than in one lump sum.
The choices of car finance include Hire Purchase (HP), a Personal Loan, a Leasing agreement, or Personal Contract Purchase (PCP).
Most car financing deals will look at your credit history, so you must be over the age of 18.
For most students, with average ages of 18-21 for undergraduates, you may therefore worry that car finance is not applicable to you.
Think About Your Credit History
Every one of us has a credit history. When you open a bank account for the first time, take out a mobile phone contract, subscribe to a streaming service with monthly payments, every single step of our financial life is recorded by the credit reference agencies.
A lender will refer to your credit score and credit file whenever you make an application for a financial product, such as car finance for students.
A lender will also look at your address, your employer details and salary (if you have a job) and other factors.
You are entitled to look at your credit file and to report any inaccuracies that you wish to change.
There are a few ways you can do this, such as through the excellent free Moneysupermarket Credit Monitor website and app.
Report And Update Your Credit File
If there are any problems at all on your credit file, any information that is wrong or outdated, it is important that you contact the credit reference agency and update it.
The wrong information can have a big impact on how a lender views you and could prevent you from being accepted for an application for car finance for students.
You should also think about putting your name on the electoral roll.
You’ll most likely be registered to vote at your home address, but you can also register at your student address.
Although if you do this you can only vote in one location.
Work Out Your Student Finances
Before applying for any type of loan you need to work out whether you can afford the repayments.
We’d first suggest writing down all of your financial incomings and outgoings so, you can work out what you need to borrow to afford a decent car that will stand you in good stead.
Most students don’t need a fancy, flash car, just a run-around for their student days.
The focus should always be on the safety and robustness of the car, as well as how cheap it is to run.
On top of these costs, you also need to consider costs such as your road tax, petrol costs, potential car parking costs, car insurance, and servicing costs.
Will A Part-time Job Help Me Secure Car Finance?
Most likely, once you’ve accounted for all your outgoings, you won’t have loads of money leftover as a buffer.
On top of that, the price of everything continues to go up amidst the cost of living crisis.
Looking for a part-time job could be a great way to meet new people, to have some extra money in your pocket, but it could also help you when looking for car finance, as it will become part of your credit file.
A lender will see you have a regular income on top of your savings and student loan, making you more attractive as a potential customer.
You May Need A Guarantor
It is more difficult as a young student to gain car finance than an older person with a long credit and lending history behind them, but this doesn’t mean that all is lost.
Guarantor car finance is another option for students. A guarantor is a relative or close friend who has an established, good, credit score, and someone who is willing to back your loan.
This means that if you fail to make payments, they will make the continuing payments in your place. A guarantor gives a lender confidence that it can make an offer of credit to you.
We would always advise that you have enough money to cover the first few months of payments though.
So, in the event of a financial crisis you have the time to speak to your lender about making a temporary change to your payments, rather than your guarantor being hit for payments right away.
Types Of Car Finance For Students
Many people choose to finance a car to keep their costs down. A personal contract purchase (PCP) is an option where you pay a deposit and then a series of monthly payments over the course of a contract length.
Once the contract comes to an end, you can either hand the car back fully paid off, make an optional final payment to buy the car, or trade it in and use any equity left in it to put towards the deposit on the next car you wish to buy.
Saving Money Driving As A Student
There are some other tips to help you save money when driving a car as a student, like finding the cheapest petrol station close to your student home.
Some other ways you can save your pennies is by driving consistently and within the speed limits for safety and to lower petrol costs.
You should also keep your tyres inflated, as low tyre pressure causes drag and uses more fuel.
Another tip is to get better at changing gears, maintaining a smooth engine process as this can help you lower costs.
Moreover, you should keep your car clean and as light as possible, pay your car tax annually and shop around for student friendly car insurance.
Lastly, try to avoid fines, from speeding to parking tickets, it’s logical but worth saying!
These are just a few tips to help save money whilst driving a car in your university town and beyond.
You’ll soon figure out the best way to make your car work for you, both practically and financially.
Is It A Good Option?
Car finance for students is available to you if you are looking for a car for your university days. There might be several reasons why you might be looking for a car as a student.
Whether it’s to help you get to and from university, to get you to and from your part time job, to travel away for the weekend with friends, to go back home to visit family, or to help you with everyday life with mobility issues.
Whatever you do, make sure that you understand your student finances, that you know what your credit score looks like, and that you choose a car finance option that makes sense to you financially.
If you can’t afford the repayments on a car, or you blow your student loan and/or savings on buying a car, you might put yourself in a bad position for the rest of your time at university.
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