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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 choices by offering you interactive tools and financial calculators that provide objective and original content, by enabling you to conduct your own research and compare data for free – so that you can make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that appear on this website are provided by companies who pay us. This compensation could affect how and when products are featured on the site, such as such things as the order in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage or home equity products, as well as other products for home loans. But this compensation does affect the content we publish or the reviews that you read on this site. We do not cover the universe of companies or financial deals that could be accessible 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 contributor writer for 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 late 2021. They are dedicated to helping readers gain confidence to manage their finances through providing concise, well-studied and well-researched content that break down complex subjects into bite-sized pieces.
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If you’re a student trying to buy a vehicle it’s possible that you’ve discovered it more difficult than you thought. While the possibility of car loans for students do 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 can get student car loans can be arranged and are especially appealing in the event that you have a stable source of income, excellent grades , or a trusted friend or family member to co-sign on your behalf. How do you buy cars for a college student when you’re a student, or someone else with a low credit score There are many options to finance a car. While you may not have the same options as someone with a long-established job and credit history however, it’s feasible. The process of finding a car loan for a student is exactly like what it would for a postgraduate driver seeking to finance. But if you’re on a tighter student budget, matters. This is even more relevant since the average monthly expenses are record high for used vehicles, which are $515 and new cars even more expensive at $677 in the second quarter of 2022 according to . Follow these steps when you begin your car purchasing process. Set a realistic budget. Use the car loan to figure out how much you can afford to pay each month. If you’re budgeting, make mindful of the value of the vehicle, not just the price on the sticker. Consider saving for a downpayment. Although saving for a down payment can be a challenge as an undergraduate, it could result in lower rates and monthly payments. If you have time to spare, the ideal situation is saving at least 20% of the price. But even if you can’t afford that amount, aim to make at minimum a modest down cost. Choose the right car for you. It’s crucial to be realistic about the ideal car for your needs as a young person. While it could be tempting to buy a brand-new vehicle with the most recent features, consider where you’ll be parking it, how many potential passengers you’ll have and the cost of gas to get an option that is more luxurious. Make sure you secure the cost of financing. It is advisable to apply for a loan prior to shopping for a car either online or in personto make sure you know the amount you are able to afford and skip out on dealership markups. In the case of a lender, prequalification will mean a soft credit pull. Be prepared to provide the necessary documents to confirm the information you provide. Negotiate. can be very intimidating, especially for young people. If you are buying as a student, it is wise to bring a trusted adult or an adult from the family. This way you feel more confident to push to get the deal you want. However, no matter what, stay assured and don’t be afraid to walk away. How can you increase your chances of loan approval. As with any loan with the highest favorable rates, terms and acceptance are available to those with good credit. For a student who has only a little credit history, approval can be difficult. But there are a number of methods to increase the chances of getting approval when you’re buying a car as student. Provide a steady source of income. The most effective way to get a car loan as a student to prove a reliable source of income. Before granting you an auto loan the lender will be looking to verify that you can demonstrate a solid means of paying for the loan’s monthly installment. If you have a job and have a record of at the very least a few months’ income, you will increase the likelihood of getting accepted. Speak to banks or credit unions with whom you already have accounts If there isn’t a reliable source of earnings, or if your income is fluctuating or seasonal it could be a problem getting a car loan from a variety of lenders. If you have an account with an institution in your area , you might contact it. They may provide student auto loans and other services targeted towards people who are in the same situation. It is possible to talk directly with a loan manager or officer with approval powers. The primary benefit is that it may be more straightforward to present your argument and convince that person in person. You can also get a co-signer. Another option is to find a trusted friend or family member to sign your vehicle loan. If you’ve got a co-signer you, your lender will also examine your co-signer’s credit history and income. The advantage can be the fact that your loan is higher likelihood of being approved. However, one drawback is that the co-signer is legally accountable for your car loan. If you’re not able pay the loan, it can cause friction between you. Get good grades Similar to lenders factoring credit history, some lenders use their GPA as a way to determine loan approval. If you carry a strong GPA, consider sharing that with potential lenders. Because while not all will consider it, in certain circumstances, good grades may 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 throughout the years, but one aspect remains the sameIf you’re able to research, you can often save money. The less time you have to research all options, the more money you’ll have to shell out for your vehicle. Family and friends Finding a vehicle from a family member is likely going to be the perfect situation. Buying a car with someone who you can trust will reduce the possibility that you’ll buy a lemon. Plus, depending on who you’re purchasing it from, they might offer an offer on the cost. While this may be the best scenario, if no one has ever tried to sell their car then you’re out of the market. Local car dealers Although a lot of experiences have gone online, there’s still merit in visiting local dealers in the car industry. Nearly all dealers have their inventory on the internet as well and you’ll be able to see the available cars before heading to the dealership to test drive. While using the internet to help you find a car is an excellent idea for many, there are those who prefer seeing and experiencing the vehicle in person. On the internet, in addition to browsing the websites of local new and used dealerships, there are many alternatives . In the case of buying online, you can purchase with confidence using marketplaces for used cars online such as . Facebook Marketplace, Craigslist and eBay are among the sites on which you can search for individuals privately selling cars, but be on the lookout for . Other expenses to consider Keep in mind that it’s not just the price of your car loan that will affect your budget. Be sure to make space for these other car-related expenses as well. Sales tax and registration fees. The fees and taxes vary by state and local jurisdiction Check and find out the amount they’ll cost you. Expected cost: Between $400-$700 based on the state you live in, according to . Insurance. Most states require you to be covered at least with liability insurance. Check around with a couple of brokers and agents to find the insurance which best meets your requirements. Expected price: $1,771 based upon your home state, the driving record and type of vehicle according to . Parking. Particularly for 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 according to data compiled from various universities. Fuel. As gas prices rise, the cost of fuel can be a major factor in your budget. Expected cost: Average $3.84 per gallon as of the date of the end of August 2022 according to . Repairs and maintenance. In contrast to other types of insurance, insurance for cars does not usually include routine maintenance items, such as oil changes. You should ensure your budget allows money for these items. Expected cost: $9,666 for new vehicles According to . How to drive without buying If you’re having difficulty being eligible for a student auto loan or have concluded that it’s not right move for you You have other options. Leasing When you lease, you are given a vehicle to use for a predetermined duration and number of miles. When the lease is over, term of the lease in the event that there’s no damage to the vehicle and you’re not exceeding your mileage limit and you’re not in violation of the lease, you can hand the car back to the leasing company and walk off. Since you don’t have ownership of the vehicle and you only own it for a set time, the monthly cost for leases is typically lower than a car loan. If you wish to pay at the end of the lease instead it is possible choose to, if you are allowed stipulated in the lease contract. Renting a car If you only need a car very sporadically, you can consider renting a car when you’re in need of one. Although renting a car can be costlier on a per-day basis than a car loan but if you just need an automobile for a couple of times per year, it could be more affordable. When you rent a car it is also not necessary to fret about maintenance, taxes or fees. Car sharing Another option is subscribing to the car sharing service. Turo is a peer-to-peer vehicle rental service that lets you hire cars directly from people. It’s similar in terms of cost and ease to renting a car through the company. If you’re located in an area where they’re supported, you can also subscribe to a car sharing service like Car2Go or Zipcar. These services usually require an annual or monthly membership and permit the use of cars at less per hour or by the day. The bottom line: While it may seem difficult to obtain 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 should also speak with a variety of lending institutions to review rates and find the most affordable deal. Consider all of the extra costs associated when you own a car, and decide if you can make do with alternatives such as renting, ride-sharing or public transportation. Learn more
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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 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 gain the confidence to manage their finances by providing precise, well-studied information that breaks down complicated topics into digestible chunks.
Auto loans editor
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