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A student’s guide to car buying Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools that provide objective and original content, by enabling you to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear within the listing categories and other categories, unless prohibited by law. This applies to our mortgage home equity, mortgage and other home loan products. This compensation, however, does not influence the information we publish, or the reviews appear on this website. We do not contain the entire universe of businesses or financial offerings that could be open to you.

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7 minutes read. Published August 31, 2022

Authored by Dan Miller Written by Points and Miles Expert Contributor

Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and debt management in his writing.

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 manage their finances through providing clear, well-researched information that break down complex topics into manageable bites.

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If you’re a student trying to purchase a car, you may have found it a bit more challenging than you thought. While automobile loans for students exist however, many lenders are cautious of providing loans to first-time buyers or those with limited credit history. But, student car loans are possible and are especially appealing in the event that you have a stable source of income, excellent grades , or the trust of a family or friend member to sign on your behalf. How to buy cars for a college student if you’re a student or someone else with poor credit score there are ways to finance a car. While you might not have as many options as someone with a long-established job and credit history but it’s still possible. The process of obtaining the right car loan as a student looks similar to the procedure for a postgraduate driver seeking to finance. But as you may be on a tighter student budget this is a factor to consider. This is particularly true as average monthly costs are at an all-time high, with used cars at $515 and new cars even higher at $677 by 2nd quarter 2022 according to . Follow these guidelines when you begin the car buying process. Create a budget that is realistic. Use the car loan to figure out how much you can afford to pay each month. If you’re budgeting, make certain to concentrate on the of the vehicle and not just the cost of the vehicle. Make a savings plan for a down payment. Although saving for a down payment can be difficult for a student, it can mean lower rates and more frequent installments. If you’re able to save, the ideal scenario is to save at least 20 percent of the purchase price. However, even if you cannot pay that much, try to budget for a minimum down amount. Find the best car for you. It’s crucial to think realistically about the best car to meet your needs as a young person. Although it might seem appealing to buy a brand-new car that has the most modern technology, think about where you’ll park it, the amount of potential passengers you’ll have and the cost of gas for an option that is more luxurious. Make sure you secure financing. It is smart to apply for a loan ahead of car shopping either in person or on the internet- to ensure you know the amount you can manage and to avoid dealer markups. Depending on the lender the prequalification process will be the pulling of a credit card. You should also be prepared to share necessary documentation to verify the details you have provided. Negotiate. can be very intimidating, especially for young people. When it comes to car purchasing as a student it is wise to bring an adult who is trustworthy or a someone from your family with you. So you can are more confident in pushing for the deal you deserve. However, no matter what, remain confident and do not be afraid to walk away. What can you do to increase your odds of loan approval. Like any loan with the highest competitive rates, terms and approval are offered to those who have good credit. As a student with very little credit history, approval can be difficult. However, there are plenty of ways to improve your chances of approval when you’re buying a car as a student. Show a reliable source of income. The most effective method to qualify for a car loan for a student is to prove a reliable sources of revenue. Before giving you the car loan lenders be looking to verify that you have a reliable method of paying the monthly payment. If you have a job and have a record of at minimum a couple of months of income, you’ll have a better chance of increasing your chances of being approved. Contact banks and credit unions with which you already have accounts If your income isn’t stable source of income, or if your income fluctuates or is not consistent, you may have trouble getting a car loan from the majority of lenders. If you have an account at a local bank or it is a credit union, you could reach out to it. They may provide students car loans or other programs targeted towards people who are in your position. You might be able to talk directly with a loan officer or manager with authority to approve. The primary benefit is that it may be easier to plead your case and convince someone in person. Find a co-signer A different alternative is to ask an individual who is a trusted family member to for your vehicle loan. When you have co-signers you, the lender will also examine the credit history of the co-signer and income. The benefit of this will be that the loan is more likely to be approved. One drawback, however, is that your co-signer is also legally responsible for your car loan. If you’re not able to pay the loan, it could create friction between you. Make sure you have good grades. Similar to lenders that consider credit history, some lenders use their GPA as a measure of loan approval. If you have a good GPA you should consider sharing it with prospective lenders. While not all lenders factor it, in some instances, good grades can provide better rates. What are the best places to look for cars while a student Much has changed regarding the method people buy and sell cars throughout the years, but one aspect remains the sameIf you have the time to shop around and compare prices, you’ll often save money. The shorter time you have to explore all your options, the more you’ll have to shell out for your vehicle. Friends and family Finding a vehicle from a family member is likely to be the perfect situation. A car purchase from someone you trust limits the chance that you buy the wrong car. Plus, depending on who you’re buying it from, they may be willing to cut you an offer on the cost. Although this could be the ideal scenario, if there’s no one has ever tried to sell a car and you’re not able to sell it, you’re out of luck. Local car dealers Even though a lot of experiences have gone online, there’s still merit in visiting local car dealers. Nearly all dealers have their inventory on the internet as well which means you can check out the cars available prior to heading to the showroom to test drive. While using the internet to help you in your car search makes a lot of sense, many people enjoy visiting the vehicle in person. Online In addition to checking out the sites of local used and new dealerships, there are many alternatives . When it comes to online buying, you can buy securely using dedicated online used car marketplaces such as . Facebook Marketplace, Craigslist and eBay are just a few sites where you can search for individuals selling their cars privately and other items, but keep an eye on what to watch for . Other costs to keep in mind Remember that it’s not just the cost of your car loan that can impact your budget. You must ensure that you have room for these other car-related expenses too. Registration and sales tax. The fees and taxes vary according to the state and local authority, so check and see how much they will cost you. Expected cost: Between $400-$700 based on your state according to . Insurance. A majority of states require you to have at least liability insurance. Take a look at a couple of brokers and agents to find the coverage that is most suitable for your needs. Expected cost: Average of $1,771 depending on the state you reside in, your driving history , and the type of vehicle according to . Parking. Particularly if you’re a student at a college, you might need to pay for parking near or on campus. Costs expected to be $362 annually or $181 per semester, as per data from several universities. Fuel. With gas prices rising as well as the cost of fuel can 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. Like other types of insurance, insurance for cars does not usually provide routine maintenance services, such as oil changes. You should ensure your budget is sufficient to cover these things. Expected cost: $9,666 when buying new vehicles, according to . How to drive a car without buying If you’re having trouble qualifying for a student car loan or have decided that it’s not the most suitable option for you, there are other options. Leasing When you , you get a vehicle to use for a predetermined period and a certain number of miles. After the period of the lease, as long as there’s no damage on the vehicle and you’re not exceeding your allotted miles, you can give the vehicle over to leasing firm and walk out. Since you don’t have ownership of the vehicle and you only hold it for a certain periodof time, the monthly installment for leases is typically lower than a loan. If you’d like to take it off terminate the lease rather, you can if the option is stipulated in the lease contract. Renting a car only need a car very often, you might consider hiring a car whenever you’re in need of one. Although renting a car can be more expensive on a per-day basis than making a car payment, if you only need an automobile for a couple of times a year, it may end up being more economical. When you rent a car, you also don’t need to fret about maintenance, tax or charges. Car sharing is another option. signing up to an auto sharing service. Turo is a peer-to-peer car rental service that lets you lease cars directly from the owners. It’s comparable in price and convenience to renting a car through the company. If you live in a region where they’re supported, you can also subscribe to the car sharing services like Car2Go as well as Zipcar. These services typically require an annual or monthly subscription and permit the use of cars at lower rates per hour or per day. The bottom line: While it might seem difficult to secure auto loans for students in college It is not impossible. Do your homework to find a good car and explore getting a co-signer, if possible. It is also advisable to speak with various lenders to compare rates to find the best deal. Consider all of the extra costs that come from owning a vehicle and consider if you are able to get by with alternatives like leasing, ride-sharing or public transportation. Learn more

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Authored by Points and miles Expert Contributor

Dan Miller is a former contributing writer for 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 late 2021. They are passionate about helping readers to take control of their finances through providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.

Auto loans editor

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