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A student’s guide to car buying Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering you financial calculators and interactive tools, publishing original and objective content. This allows you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site come from companies who pay us. This compensation can affect the way and where products appear on this site, including, for example, the sequence in which they appear in the listing categories and other categories, unless prohibited by law. Our mortgage, home equity and other home lending products. But this compensation does have no impact on the information we provide, or the reviews that you read on this site. We do not contain the universe of companies or financial offerings that could be accessible to you.
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7 minutes read. Published August 31 2022
Written by Dan Miller Written by Points and Miles Expert Contributor
Dan Miller is a former contributor writer for Bankrate. Dan wrote about loans, home equity and debt management in his work.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances through providing concise, well-studied and well-researched content that breaks down complicated topics into manageable bites.
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If you’re a student looking to purchase a car and you’ve found it more difficult than you thought. While car loans for students do exist however, many lenders are cautious of lending money to first-time car buyers or those with a weak credit histories. However it is true that students can get student car loans can be arranged and are especially appealing when you have a steady source of income, excellent grades or can get an amiable friend or family member to co-sign for you. What can you do to purchase a car while a student when you’re a student, or someone else with a limited credit history there are ways to finance the purchase of a car. While you might not have the same choices as someone with an extensive job history and credit score, it is feasible. The process for obtaining a car loan as a student appears similar to the procedure for a postgraduate driver seeking to finance. But as you may be with a smaller budget for your student is what matters. This is particularly relevant since the average monthly expenses are at an all-time high and used cars costing $515 and brand new cars more expensive at $677 in 2nd quarter 2022, according to . Follow these guidelines when you begin the car buying process. Set a realistic budget. Make use of the car loan to figure out how much you can afford to pay each month. If you’re budgeting, make sure to focus on the value of the vehicle, not just the cost of the vehicle. Make a savings plan for a down payment. While saving for a could be a challenge as students, it could result in lower rates and monthly installments. If you’re willing to wait, the best-case option is at least 20% of the purchase price. But even if you can’t afford that amount, aim for at least a small down amount. Choose the right car for you. It is important to consider the ideal car for your needs as a young person. While it could be tempting to purchase a brand-new car with all the latest features, consider the location you’ll park it, the amount of possible passengers you’ll be able to accommodate and even the price of gas to get the more expensive option. Lock in the cost of financing. It’s a good idea to apply for a loan prior to shopping for a car either in person or online -to make sure you know the amount you can afford and skip out on dealership markups. Based on the lender, prequalification will mean the pulling of a credit card. It is also important to submit the required documentation to verify the details you have provided. Negotiate. Negotiating can be quite intimidating, especially for a young person. In the case of car buying while a student, it is wise to bring a trusted adult or family member with you. This way you will be more confident about pushing for the deal you deserve. No matter what, stay assured and don’t hesitate to walk away. How can you increase your chances of loan approval. Like any loan that you apply for, the best competitive rates, terms and acceptance are available to those with strong credit. And as a student with a small amount of credit history, getting approved can be a problem. However, there are plenty of methods to increase your chances of getting approval for a car purchase as a student. Show a reliable source of income. The best way to get a car loan as a student is to show a reliable earnings source. Before giving you a car loan lenders want to see that you can demonstrate a solid way of making the loan’s monthly payments. If you’re employed and have a record of at the very least a few months’ income, you’ll have a better chance of increasing your chances of being approved. Contact banks and credit unions where you already have accounts If you don’t have a steady source of income, or if your income fluctuates or is not consistent it could be a problem getting a car loan from a variety of lenders. If you already have an account with an institution in your area perhaps a credit union, it might be possible to reach out to it. It could offer student auto loans as well as other financial programs geared towards those in your situation. You might be able to talk directly with a loan manager or officer with approval powers. The major benefit is that it may be easier to plead your case and convince an individual. Get a co-signer Another option is to find a trusted friend or family member to help you with your car loan. When you have co-signers, your lender will also take a look at the credit history of your co-signer as well as income. The advantage can be the fact that your loan is higher likelihood of being approved. The downside is that the cosigner is also legally responsible for the car loan. If you’re not able to pay the loan, it could cause tension in your relationship. Make sure you have good grades. Similar to lenders factoring credit history, some lenders use the GPA as a metric for loan approval. If you have a good GPA, consider sharing that with prospective lenders. While not all lenders factor it, in some circumstances, good grades may mean more competitive rates. Where to shop for cars while an undergraduate A lot has changed about the way people purchase and sell vehicles throughout the years, but one aspect has remained the same — if you’re willing to look around, you can often save money. The less time you have to look at all the options, the more you’re likely to pay for the car you want to purchase. Friends and family Finding a purchase from a family member is likely going to be the ideal situation. A car purchase with someone who you can trust will reduce the chances that you will buy a lemon. Additionally, depending on who you’re purchasing it from, they might offer an offer on the cost. Although this could be the ideal situation, if nobody knows anyone who is looking to sell their vehicle, you will be out of the market. Local car dealers Although a lot of experiences are now online, there is still a worth looking into local car dealers. Most dealers will have their inventory on the internet as well, so you can see what cars are available prior to heading to the showroom for a test drive. While making use of the internet to assist you with your search for a car is a good idea for many, there are those who prefer taking a look at and experiencing the vehicle in person. Online In addition to browsing the online sites of local used and new car dealers, there’s numerous other . When it comes to purchasing online, you are able to buy securely using dedicated online used car marketplaces such as . Facebook Marketplace, Craigslist and eBay are among the sites on which you can search for individuals selling their cars privately, but be on the lookout for . Other costs to consider Keep in mind that it’s not just the costs of your vehicle loan that can impact your budget. You must ensure that you have the space to cover these other auto-related expenses too. Registration and sales tax. These taxes and fees vary depending on the local and state jurisdictions So, make sure to check what they cost you. Expected costs: Between $400 and $700 depending on the state you live in as per . Insurance. Most states require you to have at minimum liability insurance. You can consult a number of different agents and brokers to find the coverage which best meets your requirements. Expected cost: $1,771 based on the state you reside in, your the driving record and type of vehicle as per . Parking. Particularly if you’re a college student, you may be required to pay to park on or near campus. Costs expected to be $362 annually or $181 per semester as per data from several universities. Fuel. With gas prices rising and the price of fuel could be a major factor in your budget. Expected price: $3.84 per gallon as of the close of August 2022 according to . Repairs and Maintenance. In contrast to other types of insurance, car insurance typically does not include routine maintenance items, such as oil changes. It is important to ensure that your budget is sufficient to cover the above items. Expected cost: $9,666 when buying new vehicles as per . How to drive without purchasing If you’re having difficulty being eligible for a student auto loan or you’ve decided that it’s not the best option for you You have other options. Lease When you lease , you receive a car to use for a specific period and a certain amount of miles. At the end of the lease term in the event that there is no damage to the car and you’re under the miles you’ve been given then you are able to give the vehicle over to leasing firm and drive away. Since you don’t actually own the car and only hold it for a set periodof time, the monthly installment on a lease is usually lower than a loan. If you want to at the end of the lease rather, you can if the option is stipulated in the lease contract. Renting a car just require a car often, you might consider hiring a car whenever you require one. Although renting a car can be higher on a per-day basis than a car payment, if you only need the car for a few times throughout the year, it could end up being more economical. When you’re renting a car it is also not necessary to be concerned about maintenance costs or fees or taxes. Car sharing is another option, as is subscribing to a car sharing service. Turo is a peer to peer car rental service, where you can lease cars directly from the owners. It’s comparable in cost and convenience to renting a car through a company. If you’re in an area that is supported, you can also join the car sharing services like Car2Go as well as Zipcar. They typically require a monthly or annual membership and allow the use of cars at less per hour or per day. The bottom line: While it may seem difficult to obtain car loans for college students, it is possible. Take your time to locate a good car and explore getting a co-signer, if possible. You’ll also want to talk with various loan providers to evaluate rates and find the best deal. Take into consideration all the additional expenses that go from owning a vehicle and consider if you are able to save money by using alternatives such as rental, ride-sharing, or public transportation. Find out more
The article was written by an expert contributor to Points and Miles.
Dan Miller is a former contributor to Bankrate. Dan covered loans, home equity , and debt management in his work.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers to control their finances through providing precise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces.
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