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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 smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content, by enabling you to conduct research and to compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this site are from companies who pay us. This compensation could affect how and where products are displayed on this website, for example for instance, the sequence in which they appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other home lending products. However, this compensation will have no impact on the information we provide, or the reviews that appear on this website. We do not include the entire universe of businesses or financial offerings that could be available to you.
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7 minutes read. Published August 31 2022
The book was written by Dan Miller Written by Points and Miles Expert Contributor
Dan Miller is a former contributor to Bankrate. Dan covered loans, home equity and debt management in his writing.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances through providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
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If you’re a student looking to buy a car and you’ve found it a bit more challenging than you anticipated. While automobile loans for students exist, many lenders are wary of providing loans to first-time buyers or those with a weak credit histories. However it is true that students’ car loans are feasible — especially when you have a steady source of income, good scores or can find the trust of a family or friend member to co-sign for you. How do you buy cars for a college student if you’re a student or have a limited credit history, there are options to finance a car. While you might not have the same alternatives as someone who has an established job and credit score however, it’s possible. The process of obtaining an auto loan as a student looks just like the process would for a postgraduate who is looking to finance. But as you may be on a tighter student budget this is a factor to consider. This is even more relevant since the average monthly expenses are at record levels, with used cars at $515 and new cars even more expensive at $677 in 2nd quarter 2022 according to . Follow these guidelines when you start your car buying process. Figure out a realistic budget. Make use of car payments to determine the amount you are able to pay each month. When budgeting, be certain to concentrate on the of the vehicle and not just the cost of the vehicle. Save for a down payment. While saving for a down payment may be difficult for students, it could mean lower rates and more frequent payments. If you’re able to wait, the best-case situation is saving at least 20% of the cost. But even if you can’t pay that much, try to budget to make at minimum a modest down amount. Choose the right car for you. It’s crucial to consider the right car for your needs as a young man. Although it might seem appealing to buy a brand-new car with all the latest technology, think about where you’ll be parking it, how many possible passengers you’ll be able to accommodate and even the price of gas to get the more expensive option. Secure the financing. It’s a good idea to apply for a loan ahead of car shopping — in person or online -to be sure of the amount you can manage and to avoid markups at the dealership. In the case of a lender it is possible to get prequalified. This could mean the pulling of a credit card. You should also be prepared to submit the required documentation to verify the information you provide. Negotiate. Negotiating can be quite intimidating, especially for young people. When it comes to car purchasing as a student it is recommended to bring a trusted adult or an adult from the family. This will make you will be more confident about pushing for the price you’re entitled to. No matter what, remain confident and do not hesitate to walk away. How can you increase your chances of loan approval As with any loan, the most favorable rates, terms and approval are offered to those who have good credit. And as a student with only a little credit history, getting approved can be a challenge. However, there are plenty of ways to improve the chances of getting approval when purchasing a car as student. You must prove a reliable source of income. The most effective way to secure a car loan for a student is to show a reliable sources of revenue. Before granting you a car loan, lenders will be looking to verify that you have a stable means of paying for the loan’s monthly payments. If you have a job with a track record of at least a few months of income, you will increase the likelihood of getting accepted. Speak to banks or credit unions where you have accounts if your income isn’t steady source of income, or your income is fluctuating or seasonal it could be a problem getting a auto loan from most lenders. If you have an account with local banks or credit unions it is a credit union, you could reach out to it. It could offer student car loans as well as other financial programs targeted at people who are in the same situation. You might be able to talk directly with an loan manager or officer with approval powers. The main advantage is that it could be more straightforward to present your case and convince an individual. Get a co-signer Another option is to find someone you trust like a family member to for your vehicle loan. If you have a co-signer, it is likely that the lender will also take a look at your co-signer’s credit history and income. The advantage of this is that your loan is much better able to get approved. One drawback, however, is that the cosigner is also legally responsible for your car loan. If you’re not able make the payments, that can cause friction between you. Have good grades. Like lenders who consider credit history, some lenders rely on your GPA as a way to determine loan approval. If you have a high GPA, consider sharing that with potential lenders. While not all lenders factor it, in some cases, good grades could mean more competitive rates. Where can you shop for cars when you’re an undergraduate A lot has changed about the way people purchase and sell cars over the years, but one aspect remains the samewhen you’re willing to shop around and compare prices, you’ll often save money. The less time you have to look at all the options, the more you’ll pay for your car. Friends and family Finding a purchase from a family member is most likely to be a perfect scenario. Buying a car with someone who you can trust reduces the chance that you buy a lemon. Plus, depending on who you are buying the car from, they might be willing to make an offer on the cost. This could be an ideal scenario, if there’s no one knows anyone who is looking to sell a car then you’re out of the market. Local car dealers While many experiences have gone online, there’s still merit in visiting local dealers in the car industry. Most dealers will have their inventory online , too which means you can check out the available cars prior to heading to the showroom to take a test drive. While using the internet to help you in your car search is an excellent idea it is also a popular method of taking a look at and experiencing the car in person. On the internet, in addition to looking at the online sites of local used and new dealerships, there are many other . In the case of purchasing online, you are able to buy securely using dedicated online marketplaces for used cars such as . Facebook Marketplace, Craigslist and eBay are just a few sites where you can look for people selling their vehicles privately and other items, but keep an eye on what to lookout for . Other costs to be aware of Remember that it’s not just the cost of your car loan that will affect your budget. Be sure to make room for these other car-related costs as well. Registration and sales tax. These taxes and fees vary according to the state and local authority Check and find out what they cost you. Expected costs: Between $400-$700 based on the state you live in according to . Insurance. The majority of states require that you have at least liability insurance. Take a look at a couple of brokers and agents to determine the type of coverage which best meets your requirements. Expected cost: $1,771 depending on your state of residence, driving history and vehicle type according to . Parking. Particularly if you’re a college student, you may need to pay for parking on or near campus. Costs expected to be $362 per year or $181 per semester, according to data compiled from various universities. Fuel. As gas prices rise, the cost of fuel could be a major factor in your budget. Expected price: $3.84 per gallon by the close of August 2022 according to . Repairs and Maintenance. In contrast to other types of insurance, insurance for cars does not usually cover routine maintenance, like oil changes. You’ll want to make sure your budget allows money for these things. Expected price: $9,666 for new vehicles, according to . How to drive without buying If you’re having trouble getting a student car loan, or if you’ve decided that it’s not the right move for you There are alternatives. Leasing When you , you are given a vehicle to use for a predetermined time period and a specific number of miles. At the end of the lease term in the event that there’s no damage to the vehicle and you’re not exceeding the miles you’ve been given then you are able to give the car over to leasing firm and drive away. Because you don’t own the car , and only own it for a specific periodof time, the monthly installment for leases is typically lower than a car loan. If you want to close the lease instead, you can opt to do so if it’s included in the lease agreement. Renting a car just require a car often, you might consider renting a car when you need one. While renting a car is higher on a daily basis than a car loan, if you only need an automobile for a couple of times per year, it might prove to be more economical. If you’re renting a vehicle, you also don’t need to worry about maintenance or tax or charges. Car sharing Another option is subscribing to a car sharing service. Turo is a peer to peer car rental service where you can lease cars directly from the owners. It’s similar in price and convenience as renting a car from an organization. If you’re in an area that is accepted, you can join a car sharing service like Car2Go as well as Zipcar. These services usually require a monthly or annual membership and permit you to rent cars for cheaper rates by the hour or per day. The bottom line: While it might seem difficult to secure car loans for college students, it is possible. Take your time to locate an affordable car, and think about getting a co-signer, if possible. It is also advisable to speak with different loan providers to evaluate rates and find the best possible deal. Take into consideration 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 transport. Find out more
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Authored 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.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers to take control of their finances with precise, well-studied information that breaks down otherwise complex topics into manageable bites.
Auto loans editor
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