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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 offering you interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and to compare information at no cost - so that you can 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 products that appear on this site come from companies that compensate us. This compensation could affect how and when products are featured on the site, such as, for example, the order in which they appear in the listing categories and other categories, unless prohibited by law for our mortgage home equity, mortgage and other home loan products. However, this compensation will affect the content we publish or the reviews that appear on this website. We do not include the vast array of companies or financial offers that may be accessible to you.



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7 min 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.







Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-studied and well-researched content that breaks down otherwise complex topics into digestible chunks.









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If you're a student looking to buy a car it's possible that you've discovered it a bit more challenging than you thought. While automobile loans for students do exist however, many lenders are cautious of offering loans to first-time buyers or those with limited credit histories. However, students' car loans can be arranged and are especially appealing if you have a reliable source of income, excellent grades , or a trusted friend or family member to sign on your behalf. What can you do to purchase a car while a student if you're a student or someone else with a low credit score, there are options to finance a car. While you might not have as many alternatives as someone who has an established job and credit history, it is possible. The process for obtaining an auto loan as a student looks exactly like what it would for a postgraduate seeking to finance. But as you may be on a tighter student budget, matters. This is even more than the case when monthly averages are record high, with used cars at $515, and new cars higher at $677 by 2nd quarter 2022 according to . Follow these steps when you start your car buying process. Set a realistic budget. Make use of a car payment to determine the amount you are able to spend every month. When budgeting, be certain to concentrate on the value of the vehicle, not just the price on the sticker. Make a savings plan for a down payment. Although saving for a down payment can be difficult for a student, it can result in lower rates and monthly installments. If you're able to spare, the ideal option is 20% of the price. Even if you are unable to afford that amount, aim for at least a small down payment. Choose the right car for you. It's crucial to be realistic about the ideal car for your needs as a young man. While it may seem enticing to buy a brand new car with all the latest features, take into consideration the location you'll park it, the amount of potential passengers you'll have and the cost of gas to get the more expensive option. Make sure you secure the cost of financing. It is smart to apply for a loan prior to going car shopping whether online or in personto make sure you know the amount you are able to pay and avoid dealership markups. Depending on the lender it is possible to get prequalified. This could mean a soft credit pull. It is also important to submit the required documentation to confirm the information you provide. Negotiate. It can be a bit intimidating, especially for young people. In the case of car buying while a student, it is advisable to take a trusted adult or an adult from the family. This will make you feel more confident to push to get the deal you want. No matter what, remain confident and do not hesitate to walk away. What can you do to increase your odds of loan approval. Like any loan, the most competitive rates, terms and approval are offered to those who have good credit. And as a student with very little credit history, approval can be a challenge. But there are a number of ways to improve your chances of getting approval for a car purchase as student. Provide a steady source of income. The best way to secure a car loan as a student is to show a reliable earnings source. Before giving you an auto loan, lenders will require proof that you have a stable means of paying for the loan's monthly payment. If you have a job and have a record of at least a few months of income, you'll have a better chance of increasing your odds of being accepted. Talk with banks or credit unions with whom you already have accounts If there isn't a reliable source of income, or your income fluctuates or is not consistent, you may have trouble getting a auto loan from a variety of lenders. If you have an account at an institution in your area it is a credit union, you could contact it. It may offer student car loans and other services geared towards those who are in the same situation. You might be able to talk directly with an loan manager or officer with authority to approve. The main benefit is that it may be more straightforward to present 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 help you with your car loan. When you have co-signers then the lender will also look at the credit history of the co-signer and income. The advantage of this will be that the loan is much more likely to be approved. However, one drawback is that the cosigner is also legally responsible for the vehicle loan. If you're unable to pay your loan on time, it could cause friction between you. Make sure you have good grades. Similar to lenders factoring credit background, some lenders consider your GPA as a way to determine loan approval. If you carry a strong GPA, consider sharing that with potential lenders. While not all lenders take into account it, in certain cases, good grades could mean more competitive rates. Where can you shop for cars when you're students Much has changed regarding the method people buy and sell cars over the years, but one aspect remains the samewhen you're willing to research and compare prices, you'll often save money. The less time you've got to research all choices, the less you'll have to shell out for the car you want to purchase. Family and friends Finding a purchase from a family member is most likely to be a perfect scenario. If you purchase a car by someone whom you know reduces the chances that you will purchase a lemon. Plus, depending on who you're purchasing it from, they might be willing to cut you a deal on the price. This could be an ideal situation, if nobody has ever tried to sell their car then you're out of the market. Local car dealers Even though a lot of instances have gone online, there's still merit in visiting local car dealers. Most dealers will have their inventory on the internet as well and you'll be able to see the available cars prior to heading to the showroom to take a test drive. While making use of the internet to aid you find a car is an excellent idea for many, there are those who prefer taking a look at and experiencing the car in person. Online In addition to browsing the online sites of local used and new car dealers, there are a variety of other . When it comes to purchasing online, you are able to buy securely using dedicated online used car marketplaces such as . Facebook Marketplace, Craigslist and eBay are among the sites on which you can find people selling their vehicles privately, but be on the lookout for . Other expenses to be aware of Remember that it's not only the costs of your vehicle loan which will impact your budget. Be sure to make the space to cover these other auto-related costs as well. Registration and sales tax. The fees and taxes vary depending on the local and state jurisdictions Check and find out how much they will cost you. Expected price: between $400 to $700 based on your state according to . Insurance. The majority of states require that you be covered at least with liability insurance. You can consult a number of different brokers and agents to determine the type of coverage which best meets your requirements. Expected cost: Average of $1,771 depending on your state of residence, driving history , and the type of vehicle, according to . Parking. Especially if you're a college student, you may need to pay for parking on or near campus. Costs expected to be $362 for the year or $181 per semester as per data from various universities. Fuel. As prices for gas rise, the cost of fuel can be a major factor in your budget. Estimated cost: $3.84 per gallon at the end of August 2022, according to . Repairs and maintenance. Unlike other forms of insurance, insurance for cars doesn't usually cover routine maintenance, like oil changes. It is important to ensure that your budget is sufficient to cover these things. Expected cost: Average of $9,666 for brand new cars as per . How to drive without buying If you are having trouble being eligible for a student auto loan or have decided that it's not the best option for you There are alternatives. Leasing When you , you receive a car to use for a predetermined time period and a specific amount of miles. At the end of the period of the lease and as long as there's no damage to the car and you're under your allotted miles and you're not in violation of the lease, you can hand the vehicle over to leasing firm and drive away. Because you don't own the car , and only have it for a certain periodof time, the monthly installment for a lease will typically be lower than a loan. If you'd like to take it off at the end of the lease rather then you could, choose to, if you are allowed stipulated in the lease contract. Renting a car if you just require a car occasionally, it is worth hiring a car whenever you need one. While renting a vehicle is costlier on a per-day basis than making a car payment, if you only need a car a few times a year, it could prove to be more economical. If you're renting a vehicle it is also not necessary to worry about maintenance or taxes or fees. Car sharing is another option, as is subscribing to a car sharing service. Turo is a peer-to-peer vehicle rental service where you can rent cars directly from individuals. It's similar in price and convenience to renting a car from a company. If you live in an area where they're available, you could subscribe to an auto sharing service such as Car2Go and Zipcar. They typically require an annual or monthly membership and allow the use of cars at cheaper rates by the hour or by the day. The bottom line While it may seem difficult to obtain car loans for college students but it's possible. Take your time to locate a good car and explore having a co-signer, should it be feasible. It is also advisable to speak with a variety of lending institutions to review rates and find the best possible deal. Be aware of all the additional expenses that go with owning a car and decide if you can get by with alternatives like renting, ride-sharing or public transport. Find out more


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The article was written by an expert contributor to Points and Miles.

Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans, home equity and debt management in his work.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers feel confident to manage their finances by providing clear, well-researched information that break down complex topics into digestible chunks.






Auto loans editor




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