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A student’s guide to car buying Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering you interactive tools and financial calculators as well as publishing original and impartial content, by enabling users to conduct research and to compare information at no cost to help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that appear on this website are provided by companies that pay us. This compensation may impact how and where products appear on this website, for example, for example, the order in which they be listed within the categories of listing, except where prohibited by law. Our mortgage or home equity products, as well as other home loan products. However, this compensation will not influence the content we publish or the reviews you read on this site. We do not include the vast array of companies or financial offers that may be available to you.
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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 to Bankrate. Dan wrote about loans, home equity , and debt management in his writing.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to control their finances with precise, well-studied information that breaks down complicated subjects into bite-sized pieces.
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If you’re a student trying to buy a vehicle and you’ve found it to be a little more difficult than you thought. Although car loans for students are available but many lenders are wary of providing loans to first-time buyers or those with limited credit history. Still it is true that students’ car loans are feasible — especially if you have a reliable source of income, excellent grades , or an amiable friend or family member to co-sign on your behalf. How do you buy cars as a college student Even even if you’re in college or have a low credit score, there are options to finance the purchase of a vehicle. While you might not have the same choices as someone with a long-established job and credit history, it is feasible. The process of finding the right car loan as a student looks just like the process would for a postgraduate who is looking to finance. But if you’re with a smaller budget for your student, matters. This is especially true as average monthly costs are record high for used vehicles, which are $515, and new cars steeper at $677 in the second quarter of 2022 according to . Follow these steps when you start your car buying process. Set a realistic budget. Take advantage of the car loan to figure out the amount you are able to pay each month. When you are budgeting be sure to focus on the of the vehicle and not just the price on the sticker. Consider saving for a downpayment. While saving for a could be difficult for a student, it can mean lower rates and more frequent payment. If you’re willing to save, the ideal situation is saving at the very least 20% of the purchase price. However, even if you cannot spend that amount, you should aim to make at minimum a modest down payment. Find the best car for you. It’s crucial to think realistically about the right car for your requirements as a young adult. While it may seem enticing to purchase a brand-new car with all the latest technology, think about where you’ll park it, how many possible passengers that you could have, and even the price of gas for the more expensive option. Secure financing. It’s a good idea to apply for loan prior to shopping for a car — in person or online — to ensure you know what you can manage and to avoid dealership markups. Depending on the lender the prequalification process will be an easy credit pull. You should also be prepared to share necessary documentation to verify the information you provide. Negotiate. Negotiating can be quite daunting, especially for a young person. When it comes to car purchasing as a student it is wise to bring an adult who is trustworthy or a family member with you. This will make you are more confident in pushing to get the deal you want. But no matter what, stay assured and don’t hesitate to walk away. How can you increase your chances of loan approval As with any loan with the highest competitive rates, terms and approval are offered to those with good credit. As a student with a small amount of credit history, getting approved can be difficult. However, there are plenty of ways to improve your chances of approval for a car purchase as student. Show a reliable source of income. The best way to get a car loan as a student is to show a reliable earnings source. Before giving you the car loan, lenders will be looking to verify 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 will increase the likelihood of getting accepted. Speak to banks or credit unions with which you already have accounts . If there isn’t a steady sources of revenue, 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 at a local bank or perhaps a credit union, it might be possible to contact it. They may provide students car loans as well as other financial programs targeted towards people in your situation. It is possible to talk directly with an loan manager or officer with approval power. The primary advantage is that it will be easier to plead your argument and convince someone in person. Find a co-signer A different option is to find an individual who is a trusted family member to for your vehicle loan. If you have a co-signer, your lender will also examine your co-signer’s credit history and income. The benefit of this will be that the loan is higher likelihood of being approved. The downside is that your co-signer is legally accountable for your vehicle loan. If you’re unable to make the payments, that can cause friction in your relationship. Have good grades. Similar to lenders that consider credit history, some lenders use their GPA as a way to determine loan approval. If you have a good GPA, consider sharing that with prospective lenders. Because while not all will take into account it, in certain circumstances, good grades may provide better rates. Where can you shop for cars while students Much has changed about the way that people buy and sell vehicles throughout the years, but one part remains the sameIf you’re willing to look around, you can often save money. The less time you’ve got to look at all the choices, the less you’ll have to shell out for your vehicle. Family and friends Getting a car from a friend or family member is likely to be the perfect situation. Buying a car by someone whom you know reduces the chance that you buy the wrong car. 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 that you know is looking to sell their vehicle then you’re out of luck. Local car dealers Although a lot of experiences have gone online, there’s still value in shopping around at local dealers in the car industry. Nearly all dealers have their inventory online as well, so you can see the available cars before heading to the dealership to test drive. While making use of the internet to assist you find a car makes a lot of sense it is also a popular method of taking a look at and experiencing the car in person. On the internet, in addition to browsing the websites of local used and new car dealers, there’s a variety of other . When it comes to online buying, you can buy with security using online marketplaces for used cars such as . Facebook Marketplace, Craigslist and eBay are just a few sites where you can find people privately selling cars and other items, but keep an eye on what to watch for . Other costs to be aware of Remember that it’s not only the cost of your car loan which will impact your budget. You must ensure that you have the space to cover these other auto-related expenses too. Sales tax and registration fees. These taxes and fees vary according to the state and local authority So, make sure to check what they cost you. Expected price: between $400 and $700 depending on the state you live in, according to . 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 coverage that is most suitable for your needs. Expected price: $1,771 based on your state of residence, driving history and vehicle type according to . Parking. Particularly for student at a college, you might need to pay to park on or near campus. Expected cost: Average of $362 per year or $181 for a semester according to data compiled from several universities. Fuel. With gas prices rising, the cost of fuel can 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. Like other types of insurance, insurance for cars typically does not include routine maintenance items, such as oil changes. You’ll want to make sure your budget has enough money to cover the above items. Expected price: $9,666 for brand new cars as per . How to drive a car without buying If you are having trouble being eligible for a student auto loan, or if you’ve decided that it’s not the right move for you There are alternatives. Leasing When you , you receive a car to drive for a specified duration and number of miles. At the end of the term of the lease and as long as there’s no damage to the vehicle or the miles you’ve been given and you’re not in violation of the lease, you can hand the vehicle it back to your leasing provider and walk away. Since you don’t actually own the car , and only own it for a certain period, the monthly payment on a lease is usually less than that of a car loan. If you’d like to take it off close the lease rather then you could, opt to do so if it’s included in the lease agreement. Renting a car if you just require a car occasionally, it is worth renting a car whenever you need one. Although renting a car can be costlier on a per-day basis than a car loan, if you only need the car for a few times throughout the year, it could be more affordable. If you’re renting a vehicle, you also don’t need to be concerned about maintenance costs or tax or charges. Car sharing Another option is signing up to a car sharing service. Turo is a peer to peer car rental service where you can rent cars directly from individuals. It’s comparable in cost and convenience to renting a car from a company. If you live in an area that is available, you could join an auto sharing service such as Car2Go and Zipcar. These services typically require an annual or monthly membership and then allow you to rent cars for cheaper rates by the hour or by the day. The bottom line is that while it might seem difficult to secure car loans for students in college, it is possible. Do your homework to find the best car for you and consider having a co-signer, should it be it’s possible. You’ll also want to talk with a variety of lending institutions to review rates and find the best deal. Be aware of all the additional costs that come with owning a car and consider if you are able to make do with alternatives such as leasing, ride-sharing or public transportation. Find out more
The article was written by an expert contributor to Points and Miles.
Dan Miller is a former contributor to Bankrate. Dan wrote about loans, 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 to control their finances by providing concise, well-studied and well-researched content that breaks down complicated topics into manageable bites.
Auto loans editor
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