Car finance can be hard to get if you’re a under a certain age, so read on to find out what you need to consider
You’ve passed your driving test and you’re ready to buy your first car – you just need to work out how you’re going to pay for it.
There are a few ways you could buy your first car, including taking out car finance. But can you get car finance if you’re a young driver?
Car finance can be hard to get if you’re a under a certain age, so read on to find out what you need to consider, and some other tips to help you along the way towards getting your first car.
Car finance for 17 year olds
If you’re 17 and you’ve passed your driving test, your next step is probably working out how to buy your first car. Unfortunately, car finance isn’t an option for 17 year olds; you’re not allowed to sign a credit agreement until the age of 18.
However, there are a few things you can do to prepare for buying your first car while you’re still under 18.
Build up your credit rating
If you want to take out credit in the future, lenders will be looking at your credit history so you could start thinking about how to build up your credit rating – at this age, all you can really do is make sure you’re on the electoral register.
You might find our article on improving your credit rating useful to read before you turn 18.
If you can’t get access to finance, you might want to think about saving money towards a car/car deposit.
If you’re still in school, could you get a weekend/evening job? If you’re already in employment, could you cut any of your outgoings (e.g. eating out, going to the cinema, buying clothes, mobile phone costs) and save this money instead?
Ask family to help
Your parents or close family members might not be in a position to help you buy a car outright but would they be able to lend you some money to get your savings pot going?
Decide which car to buy
You might have your heart set on your first car, but make sure you do lots of research before you decide on what to buy. Think about how much it’ll cost to insure, the cost of running a car and so on.
Whether you buy a new car or a used car depends on lots of things, but make sure you seek advice from parents and friends. If you’re buying a car online, do lots of research beforehand.
Consider car insurance costs
When deciding which car to buy, you also need to consider that car insurance costs are very high for 17 year olds - £2,003 according to the Confused.com price index.*.
Admiral has put together a guide on the cheapest cars to insure for 17 year olds which is worth reading as part of your research.
Car finance for 18 year olds
After you turn 18, you could be eligible to apply for finance like car finance, a loan or credit card. However, being able to apply for finance doesn’t mean you should – or that you will always get accepted.
Many lenders only offer car finance to people in employment with regular income, and most lenders will be looking for a good credit history, which might be difficult to prove when you’re 18.
When you decide to apply for car finance a lender will make a ‘hard credit check’ on your credit file which leaves a record on your credit history.
A lender will initially make a ‘soft credit check’ which doesn't leave a mark on your credit history.
Making full applications for finance from multiple lenders within a short period of time could set alarm bells ringing for providers which could negatively impact your credit score.
Before you apply check whether the lender is running a ‘soft’ or ‘hard’ check on you – soft credit checks don’t impact your credit score.
If you apply for car finance and you get accepted, think carefully before choosing to go ahead.
Lenders will also do affordability and fraud checks before taking you on as a customer.
There is a lot to consider, make sure you fully understand:
- Can you afford the monthly payments being offered?
- Will you still be able to afford the monthly payments if your circumstances change?
- Which product you’re buying (is it PCP, PCH, HP or a loan?) as these will have different features and benefits
- The rates (interest rates, APR) you’re being offered
- The total amount you will be repaying, and over how long you’ll be paying
- The risk of missing a payment - you could face going into arrears or having to default on your loan in the event you can’t pay
- Does the arrangement meet your needs and do you understand what you’re buying?
Car finance for 19, 20, 21 year olds
Generally as you get older your credit history gets better which could improve your chances of getting access to car finance. This only applies if you’re in regular employment and you’re not missing any payments on any bills etc.
But you could still hit the same issues as 17 or 18 year olds and not be accepted if your credit history isn’t good enough. Read the sections above for alternatives to car finance, and things to consider before you apply or accept car finance.
Remember that no matter how old you are, a lender will carry out fraud checks and affordability checks to make sure that you can repay the car finance loan before you are accepted.
Lenders may still accept an application if you have poor credit history, but some may offer you car finance at a higher rate of interest/ high APR. It’s worth making sure you know what this means and how it impacts you and the total amount repayable; we’ve explained it in our guide to APR.
Finally, remember to check the terms and conditions of the deal to make sure you fully understand the agreement you’re entering into. Taking out car finance is a big commitment, and you should make sure you’re confident that you can make the repayments every month for the term of contract.