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7 min read Published August 31, 2022

Authored by Dan Miller Written by Points and Miles Expert Contributor

Dan Miller is a former contributor writer for Bankrate. Dan covered 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 confidence to control their finances with concise, well-studied and well-researched content that breaks down otherwise complex subjects into bite-sized pieces.

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If you’re a college student who wants to buy a vehicle it’s possible that you’ve discovered it more difficult than you expected. Although the possibility of 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. But students can get students can get student car loans are feasible and are especially appealing if you have a reliable source of income and good grades , or an amiable friend or family member to co-sign on your behalf. What can you do to purchase an automobile as a college student Even when you’re a student, or someone else with low credit score there are ways to finance the purchase of a car. While you may not have as many options as someone with an extensive job history and credit history, it is possible. The process of obtaining the right car loan as a student appears just like the process would for a postgraduate driver looking to finance. But as you may be in a lower-cost student budget, it this is a factor to consider. This is particularly relevant since the average monthly expenses are at record levels for used vehicles, which are $515 and brand new cars more expensive at $677 in the 2nd quarter in 2022, according to . Follow these guidelines when you start your car buying process. Set a realistic budget. Use a car payment to determine what you can afford to spend each month. When budgeting, be certain to concentrate on the of the vehicle and not just the cost of the vehicle. Save for a down payment. While saving for a could be a problem for an undergraduate, it could mean lower rates and more frequent payments. If you have time to spare, the ideal scenario is to save at the very least 20 percent of the cost. Even if you are unable to afford that amount, aim for a minimum down amount. Choose the right car for you. It’s crucial to think realistically about the ideal car for your needs as a young person. Although it might seem appealing to buy a brand-new vehicle with the most recent features, consider where you’ll be parking it, the number of potential passengers you’ll have and the cost of fuel for a more luxurious option. Secure the financing. It is advisable to apply for a loan prior to shopping for a car either in person or online — to ensure you know the amount you are able to afford and skip out on dealer markups. Based on the lender the prequalification process will be the pulling of a credit card. Be prepared to share necessary documentation to verify the information you provide. Negotiate. It can be a bit intimidating, especially for a young person. If you are buying while a student, it is recommended to bring an adult friend or an adult from the family. This will make you are more confident in pushing for the price you’re entitled to. However, no whatever, be positive and don’t hesitate to walk away. What can you do to increase your odds of loan approval. Like any loan, the most competitive rates, terms and approval are offered to those who have good credit. As a student with very little credit history, getting approved can be a challenge. There are a variety of ways to improve your chances of approval when purchasing a car as an undergraduate. Provide a steady source of income. The most effective method to qualify for a car loan for a student is to show a reliable sources of revenue. Before granting you a car loan, lenders will require proof that you can demonstrate a solid way of making the loan’s monthly installment. If you have a job with a track record of at least a few months of income, you’ll have a better chance of increasing your chances of being accepted. Talk with banks or credit unions where you have accounts if you don’t have a steady source of income, or if your income fluctuates or is not consistent and you’re likely to have difficulty getting a car loan from a variety of lenders. If you have an account with local banks or credit unions , you might call it. They may provide students auto loans or other programs geared towards those who are in your position. It is possible to speak directly to a loan manager or officer with authority to approve. The main advantage is that it could be more straightforward to present your case and convince an individual. Get a co-signer Another option is to find someone you trust like a family member to sign your vehicle loan. When you have co-signers, your lender will also take a look at the credit history of the co-signer and income. The advantage of this will be that the loan is better able to get approved. However, one drawback is that the co-signer is legally accountable for the vehicle loan. If you’re unable to make the payments, that could cause friction in your relationship. Make sure you have good grades. Like lenders who consider credit history, some lenders use the GPA as a measure of loan approval. If you carry a strong GPA be sure to share that with potential lenders. While not all lenders factor it, in some cases, good grades could provide better rates. What are the best places to look for cars while an undergraduate A lot has changed in the ways that people buy and sell cars through the years, however one part remains the same- if you’re able to look around, you can often save money. The shorter time you have to research all choices, the less you’re likely to pay for the car you want to purchase. Family and friends Getting a car vehicle from a family member is likely to be the perfect situation. If you purchase a car by someone whom you know limits the possibility that you’ll purchase an unsatisfactory product. In addition, depending on the person you are buying the car from, they may be willing to cut you a deal on the price. Although this could be the ideal situation, if nobody has ever tried to sell their car and you’re not able to sell it, you’re out of luck. Local car dealers While many experiences are now online, there’s still worth looking into local car dealers. Nearly all dealers have their inventory online as well, so you can see the available cars before you head to the dealership to test drive. While making use of the internet to assist you with your search for a car makes a lot of sense it is also a popular method of seeing and experiencing the vehicle in person. Online In addition to looking at the online sites of local used and new car dealers, there’s numerous other . If you are interested in buying online, you can purchase with confidence using online marketplaces for used cars such as . Facebook Marketplace, Craigslist and eBay are all sites where you can find people privately selling cars and other items, but keep an eye on what to lookout for . Other costs to keep in mind Remember that it’s not only the cost of your car loan that will affect your budget. Make sure that you have room for these other car-related costs as well. Taxes on sales and registration. The taxes and fees are different according to the state and local authority Check and find out what they cost you. Expected costs: Between $400 and $700 depending on your state as per . Insurance. Most states require you to have at minimum liability insurance. Take a look at a couple of different brokers and agents to find the insurance that is most suitable for your needs. Expected cost: Average of $1,771 based upon your home state, driving history , and the type of vehicle as per . Parking. Especially if you’re a student at a college, you might need to pay to park on or near campus. Expected cost: Average of $362 per year or $181 per semester, according to data compiled from various universities. Fuel. With gas prices rising as well as the cost of fuel could be a major factor in your budget. Expected cost: Average $3.84 per gallon at the date of the end of August 2022 according to . Repairs and Maintenance. In contrast to other types of insurance, insurance for cars doesn’t usually provide routine maintenance services, such as oil changes. You’ll want to make sure your budget allows money for these items. Expected cost: $9,666 for brand new cars, according to . How to drive without buying If you’re having trouble being eligible for a student auto loan or you’ve decided that it’s not the right move for you There are alternatives. Lease When you lease , you get a vehicle to use for a specific time period and a specific amount of miles. After the period of the lease, as long as there’s no damage to the vehicle or your mileage limit and you’re not in violation of the lease, you can hand the car over to leasing firm and walk off. Because you don’t own the car , and only have it for a specific time, the monthly cost for leases is typically lower than a car loan. If you wish to pay at the end of the lease instead, you can choose to, if you are allowed stipulated in the lease contract. Renting a car If you just require a car sporadically, you can consider renting a car whenever you’re in need of one. While renting a vehicle is higher on a daily basis than a car payment but if you just need an automobile for a couple of times a year, it may prove to be more economical. When you’re renting a car, you also don’t need to worry about maintenance or fees or taxes. Car sharing is another option. joining the car sharing service. Turo is a peer-to-peer car rental service, where you can hire cars directly from people. It’s comparable in price and convenience as renting a car from the company. If you’re in a region where they’re available, you could subscribe to a car sharing service like Car2Go as well as Zipcar. These services typically require an annual or monthly subscription and allow users to rent cars at lower rates per hour or per day. The bottom line is that while it can seem challenging to secure car loans for college students, it is possible. Take your time to locate an affordable car, and think about having a co-signer, should it be feasible. You’ll also want to talk with different loan providers to evaluate rates and find the best possible deal. Consider all of the extra costs associated when you own a car, and decide if you can make do with alternatives such as rental, ride-sharing, or public transportation. Learn more


Authored by Points and miles Expert Contributor

Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans, home equity and debt management in his work.

Editor: 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 by providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.

Auto loans editor

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