Everything You Need to Know About Car Finance for Young Drivers

Getting your first car is exciting, but it can also seem from the outset like a fairly daunting prospect.

You need to think about running costs, road tax, insurance, and the purchase of the car itself.

The good news is there are ways to make owning your first car more affordable, including car finance.

While there are challenges to getting car finance for young drivers, there are some great deals to be found.

Here, you’ll discover everything you need to know before scouting the market for the best new car deals for young drivers.

Car Finance Options for Young Drivers

There are various types of car finance for young drivers. It is important to consider all car finance options to ensure you make the right decision.

Let’s explore the different types of finance for cars you can apply for:

Lender Options

Securing car finance for young drivers isn’t always straightforward. Traditional banks might be hesitant about loans for 18-year-olds, mainly due to a lack of credit history.

However, many specialised lenders and credit unions cater specifically to younger demographics.

They often provide tailored finance for cars, understanding that young drivers may be starting from scratch.

It's essential to shop around and compare rates to get the best deal possible.

Brokers and Networking

Don't underestimate the power of networking. If you're new to the car finance world, working with a broker can be a game-changer.

Brokers have a wide network of contacts and can often find young driver-friendly finance options that might not be openly advertised.

They can also help you find new car deals for young drivers, potentially saving you a lot of money.

Their expertise streamlines the process, making car finance for students and young professionals easier to apply for.

Young Driver Incentives

The automotive industry knows the challenges young drivers face when financing their first cars. As a result, many dealerships and manufacturers offer specific incentives.

Look out for promotional new car deals for young drivers, or special car finance for students. These incentives can include reduced interest rates, cashback offers, or even insurance bundles.

Always ask dealerships about any ongoing promotions or incentives that might help lighten the financial load.

Applying with a Co-Signer

If direct financing seems daunting or out of reach, another viable option is to apply with a co-signer.

A co-signer, typically a parent or close relative with an established credit history, vouches for the loan. They assume responsibility if the primary borrower can't make payments.

This type of agreement reduces the risk for lenders, making them more likely to approve car finance for young drivers.

Ensure that both parties understand the responsibilities involved before signing on the dotted line.

Common Car Financing Challenges

While young drivers can get car finance, it can be challenging.

There are various factors that make younger drivers riskier to insure. Unfortunately, this means many lenders place restrictions on the car finance they offer.

Here’s some of the main challenges younger drivers face when looking for car finance:

Age Requirements

Many lenders set age limits, typically 18 or 21, as a baseline requirement for applicants.

This means that even if a 17-year-old has a stable income, they might not get accepted solely because of their age.

These age-related constraints stem from concerns about your ability to manage long-term financial commitments. There is also a perceived risk associated to your limited credit history.

Be aware of these age restrictions when exploring their car finance options. In some cases, it may be better to wait until you are 18 to get a better deal.

Credit History

Since you are young, you don’t have much to show on your credit history. Maybe you’re still a full-time student so you also don’t have a steady income.

Entering into a car finance agreement means you should have the capacity to pay a fixed amount every month until the end of the term.

Your credit history will impact the car finance company’s decision on whether you will be capable of making payments on time. 

Income Requirements

Only a small number of people have a steady income when they're 18. Lenders want to make sure that you will be able to pay them back if they grant you a loan.

If you are employed or have a business that provides you with ample regular income, you’ll have better luck.

You can provide a bank statement that will prove to lenders that you can pay them back as promised. 

You should always check you can afford the repayments before you apply. Use a car finance calculator to see how much it will cost you each month.

New Car Deals for Young Drivers

There are lots of new car deals for young drivers out there, making it potentially hard to decide which one is right for you.

Where to Find the Best Car Deals

When you're on the hunt for car finance as a young driver, it's essential to cast a wide net. From dealership promotions to exclusive online offers, there are plenty of avenues to explore.

Websites, forums, and car magazines often spotlight the hottest new car deals for young drivers.

For those still in education, some lenders even offer special car finance for students deals.

Just remember, the best deal isn't always about the lowest monthly payment. Consider the overall cost, the type of finance, and the flexibility it offers.

Best Car Finance for Students

While student budgets can be tight, the right car finance deal can be a game-changer.

Whether you're jetting off on weekend adventures, or just want an easier commute, understanding car finance for students is vital.

Here’s what you need to know about student car finance:

Student Eligibility Requirements

Often, lenders look for evidence of consistent income. For students, this could be from a part-time job, or an internship.

You may also need to meet credit score requirements which can be tricky. Many students don’t have much of a credit history.

Don’t worry if you don’t have much to show on your credit report. Some lenders offer car finance for young drivers specifically tailored to those with a limited credit history.

Documentation-wise, be ready with your student ID, proof of address, and any proof of income.

Remember, while it might seem daunting, many lenders understand the constraints and offer loans for 18-year-olds and older students.

Popular Student Car Finance Offers

There are plenty of enticing deals tailored to fit the student lifestyle and budget. While specifics vary, popular offers often include:

  • Reduced interest rates for a limited period
  • Flexible repayment options to cater to part time incomes
  • Deferred payment plans

You can also find package offers that bundle in insurance, maintenance, and potentially a fuel allowance.

These offers can be incredibly appealing, but it’s important to pay attention to the car finance information small print.

This will help ensure you're well-informed about the long-term commitments and potential costs.

With a bit of research and understanding, the dream of owning a car during your student years can become a reality.

Tips to Help Young Drivers Get Car Finance

It can be challenging for young drivers to get car finance. If you can wait until you’ve built up a good credit history, you will have better car finance deals to choose from. 

If you don’t want to wait for a long time, you can always get a guarantor to support you.

A guarantor increases your chances of getting car finance as they provide reassurance to the lender. They know if you fail to make the repayments, your guarantor will step up.

A guarantor can be your parents or relatives, provided they have a good credit score. Just remember to get their full permission and make sure they fully understand the loan before you apply!

Learn more about car finance for young drivers:

FAQs About Car Finance for Young Drivers

Where can I get car loans for 18-year-olds with no credit history?

For 18-year-olds with no credit history, several lenders offer car finance tailored to young drivers. Online lenders, like Carmoola, provide car finance options for younger drivers. We supply car finance to those aged 18-75.

Can I lease cars for young drivers with free insurance?

Yes, some car leasing deals, especially those marketed as new car deals for young drivers, bundle free insurance into the package.

This can make life much easier for young drivers, as it wraps up vehicle costs into one neat package.

However, always scrutinise the details to make sure the insurance provided meets all your needs, and that there are no hidden costs.

What are the best young driver car deals?

The best young driver car deals often come bundled with added perks such as free insurance, low initial deposits, or affordable monthly payments. These deals might also include maintenance packages or even fuel allowances.

Brands like Marmalade Cars offer deals specifically for younger drivers. However, platforms like Carmoola provide flexibility in choosing any used make or model. This allows young drivers to explore a broader range of options.

Does financing a car include insurance?

Typically, financing a car does not automatically include insurance. When you finance a car, the primary concern of the lender is protecting their investment, so they'll require you to have insurance.

However, the actual insurance policy is separate, and you'll need to arrange it on your own or through the dealer.

When financing a car what insurance do I need?

When you finance a car, comprehensive and collision insurance are generally required. This is to ensure that the lender's investment is protected in the event of accidents, theft, or other damages.

It's always a good idea to consult with your lender for any specific insurance requirements, and to shop around to get the best insurance deals.