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A student’s guide to car buying Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering you financial calculators and interactive tools that provide objective and original content. This allows users to conduct research and compare information for free – so that you can make sound financial decisions. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that pay us. This compensation can affect the way and where products appear on the site, such as, for example, the order in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage home equity, mortgage and other home lending products. This compensation, however, does not influence the content we publish or the reviews that you read on this site. We do not contain the universe of companies or financial deals that could be open 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 contributing writer for Bankrate. Dan covered loans as well as 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 from late 2021. They are dedicated to helping readers gain confidence to control their finances through providing precise, well-studied information that breaks down complicated subjects into bite-sized pieces.
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If you’re a college student who wants to buy a car it’s possible that you’ve discovered it more difficult than you thought. While car loans for students do exist, many lenders are wary of offering loans to first-time buyers or those with a weak credit history. Still students can get student car loans can be arranged and are especially appealing if you have a reliable source of income and good grades or can get the trust of a family or friend member to sign on your behalf. What can you do to purchase an automobile for a college student if you’re a student or someone else with a low credit score there are ways to finance the purchase of a car. Although you might not have as many alternatives as someone who has an extensive job history and credit history but it’s still feasible. The process for obtaining the right car loan as a student appears exactly like what it would for a postgraduate student seeking to finance. However, if you’re on a tighter student budget, matters. This is particularly relevant since the average monthly expenses are at record levels and used cars costing $515 and brand new cars more expensive at $677 in 2nd quarter 2022, according to . Follow these steps when you begin the car buying process. Figure out a realistic budget. Make use of a car payment to determine the amount you are able to spend each month. If you’re budgeting, make sure to focus on the of the vehicle and not just the cost of the vehicle. Save for a down payment. While saving for a could be difficult for students, it could mean lower rates and more frequent payments. If you have time to save, the ideal situation is saving 20 percent of the cost. But even if you can’t pay that much, try to budget for at least a small down cost. Decide what car is right for you. It’s crucial to think realistically about the right car for your needs as a young person. While it could be tempting to buy a brand-new vehicle with the most recent technology, think about the location you’ll park it, the number of possible passengers that you could have, and the cost of fuel for an option that is more luxurious. Secure the financing. It’s a good idea to apply for a loan prior to shopping for a car either in person or on the internetto be sure of what you can pay and avoid dealer markups. Depending on the lender, prequalification will mean the pulling of a credit card. You should also be prepared to submit the required documentation to confirm the information you provide. Negotiate. Negotiating can be quite intimidating, especially for young people. When it comes to car buying while a student, it is recommended to bring an adult friend or someone from your family with you. So you can will be more confident about pushing for the deal you deserve. But no matter what, remain confident and do not be afraid to walk away. How can you increase your chances of loan approval. As with any loan with the highest affordable rates, terms, and acceptance are available to those with good credit. As a student with only a little credit history, approval can be a challenge. However, there are plenty of ways to improve your chances of approval when purchasing a car as a student. You must prove a reliable source of income. The most effective way to get a car loan for a student is to demonstrate a steady source of income. Before granting you the car loan the lender will want to see that you have a stable way of making the loan’s monthly installment. If you have a job and a history of at minimum a couple of months of income, you’ll increase the likelihood of getting approved. Talk with banks or credit unions where you have accounts if your income isn’t stable source of earnings, or if your income is fluctuating or seasonal, you may have trouble getting a car loan from most lenders. If you have an account at an institution in your area , you might contact it. It may offer students car loans as well as other financial programs geared towards those in your situation. You might be able to talk directly with an loan officer or manager with approval power. The main benefit is that it may be more straightforward to present your case and convince someone in person. Find a co-signer A different option is to get an individual who is a trusted family member to sign your car loan. If you have co-signers you, your lender will also look at the credit history of your co-signer as well as income. The benefit of this can be the fact that your loan is better able to get approved. One drawback, however, is that your co-signer is legally accountable for your car loan. If you’re not able to pay your loan on time, it can cause tension in your relationship. Have good grades. Similar to lenders that 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. Because while not all will factor it, in some cases, good grades could provide better rates. What are the best places to look for cars while a student Much has changed in the ways that people buy and sell vehicles over the years, but one part has remained the same — if you’re able to shop around, you can often save money. The less time you’ve got to look at all the options, the more money you’ll have to shell out for the car you want to purchase. Family and friends Finding a from a friend or family member is most likely to be a perfect scenario. Buying a car by someone whom you know limits the chance that you purchase an unsatisfactory product. Plus, depending on who you’re purchasing it from, they might be willing to make some deals on the price. Although this could be the ideal situation, if nobody has ever tried to sell their car, you will be out of luck. Local car dealers While many instances have gone online, there’s still merit in visiting local dealerships for cars. Most dealers will have their inventory online , too, so you can see the available cars before heading to the showroom to take a test drive. While making use of the internet to aid you with your search for a car is an excellent idea for many, there are those who prefer visiting the vehicle in person. On the internet, in addition to checking out the online sites of local new and used dealerships, there are many other . If you are interested in buying online, you can buy with security using online marketplaces for used cars, like or . Facebook Marketplace, Craigslist and eBay are all sites where you can look for 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 costs of your vehicle loan that can impact your budget. You must ensure that you have the space to cover these other auto-related costs as well. Registration and sales tax. The taxes and fees are different according to the state and local authority, so check and see how much they will cost you. Expected price: between $400 and $700 depending on the state you live in as per . Insurance. The majority of states require that you be covered at least with liability insurance. You can consult a number of different agents and brokers to find the insurance which best meets your needs. Expected cost: Average of $1,771 based upon the state you reside in, your driving history , and the type of vehicle, according to . Parking. Especially if you’re a college student, you may have to pay to park on or near campus. Expected cost: Average of $362 for the year or $181 per semester according to data compiled from various universities. Fuel. As gas prices rise as well as the cost of fuel could significantly impact your budget. Expected cost: Average $3.84 per gallon as of the date of the end of August 2022 according to . Repairs and Maintenance. Unlike other forms of insurance, car insurance typically does not provide routine maintenance services, such as oil changes. You’ll want to make sure your budget allows money for the above items. Expected price: $9,666 when buying new vehicles, according to . How to drive a car without buying If you’re having difficulty qualifying for a student car loan or you’ve thought that it’s not the right move for you You have other options. Leasing When you lease, you receive a car to drive for a specified period and a certain number of miles. When the lease is over, lease term in the event that there is no damage to the vehicle or your mileage limit, you can give the vehicle back to the leasing company and walk off. Since you don’t actually own the car , and only hold it for a specific period, the monthly payment on a lease is usually lower than a loan. If you wish to pay at the end of the lease instead then you could, opt to do so if it’s in the original lease agreement. Renting a car If you only require a car occasionally, it is worth renting a car whenever you need one. While renting a vehicle is more expensive on a per-day basis than a car loan but if you just need an automobile for a couple of times a year, it might be more affordable. When you rent a car it is also not necessary to worry about maintenance or tax or charges. Car sharing is another option. joining an auto sharing service. Turo is a peer-to-peer car rental service where you can lease cars directly from the owners. It’s similar in terms of cost and ease as renting a car from the company. If you’re located in an area where they’re accepted, you can sign up to a car sharing service like Car2Go as well as Zipcar. These services typically require a monthly or annual membership and permit the use of cars at cheaper rates by the hour or per day. The bottom line While it may seem difficult to secure auto loans for students in college It is not impossible. Take your time to locate the best car for you and consider the possibility of a co-signer if possible. You’ll also want to talk with a variety of lending institutions to review rates and get the best deal. Be aware of all the additional costs associated with owning a car and consider if you are able to make do with alternatives such as rental, ride-sharing, or public transportation. Find out more
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The article was written by an expert contributor to Points and Miles.
Dan Miller is a former contributor to Bankrate. Dan wrote about loans as well as home equity and debt management in his work.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with precise, well-studied information that breaks down otherwise complex topics into digestible chunks.
Auto loans editor
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