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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 better financial choices by providing you with interactive financial calculators and tools that provide objective and original content. We also allow users to conduct research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are advertised on this site come from companies who pay us. This compensation could affect how and where products are displayed on the site, such as, for example, the sequence in which they be listed within the categories of listing, except where prohibited by law for our mortgage, home equity and other home loan products. This compensation, however, does affect the information we publish, or the reviews that appear on this website. We do not cover 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
Written 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 by providing concise, well-studied and well-researched content that break down complex topics into digestible chunks.
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If you’re a college student who wants to purchase a car and you’ve found it more difficult than you expected. While the possibility of car loans for students exist but many lenders are wary of offering loans to first-time buyers or those with a weak credit histories. Still it is true that student car loans are possible particularly in the event that you have a stable source of income and good grades , or a trusted friend or family member to sign on your behalf. How to buy an automobile for a college student if you’re a student or someone else with poor credit score there are ways to finance the purchase of a car. While you may not have as many alternatives as someone who has an extensive job history and credit history but it’s still feasible. The process of obtaining the right car loan as a student looks similar to the procedure for a postgraduate driver who is looking to finance. However, if you’re on a tighter student budget, matters. This is especially relevant since the average monthly expenses are at record levels and used cars costing $515 and new cars even higher at $677 by 2nd quarter 2022 according to . Take these steps before you begin your car purchasing process. Figure out a realistic budget. Make use of car payments to determine how much you can afford to spend every month. When budgeting, be mindful of the car’s value and not just the sticker price. Consider saving for a downpayment. Although saving for a down payment can be a challenge as students, it could mean lower rates and monthly payments. If you have time to spare, the ideal scenario is to save at least 20% of the cost. But even if you can’t afford that amount, aim to make at minimum a modest down amount. Choose the right car for you. It’s important to think realistically about the right car for your needs as a young man. While it may seem enticing to buy a brand new car that has the most modern features, consider where you’ll be parking it, how many potential passengers you’ll have and even the price of gas for an option that is more luxurious. Secure financing. It is smart to apply for a loan ahead of car shopping whether in person or on the internetto make sure you know the amount you can pay and avoid dealer markups. Based on the 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 details you have provided. Negotiate. It can be a bit difficult, particularly for young people. When it comes to car purchasing as a student it is wise to bring a trusted adult or an adult from the family. So you can feel more confident to push for the deal you deserve. However, no matter what, stay assured and don’t hesitate to walk away. How to improve your chances of loan approval. As with any loan, the most affordable rates, terms, and approval are offered to those with strong credit. And as a student with only a little credit history, approval can be a challenge. There are a variety of ways to boost your chances of getting approval when purchasing a car as student. You must prove a reliable source of income. The best method to qualify for a car loan as a student to prove a reliable source of income. Before granting you an auto loan, lenders will require proof that you have a stable way of making the loan’s monthly installment. If you’re employed with a track record of at least a few months of income, you’ll increase your odds of being approved. Contact banks and credit unions where you have accounts if your income isn’t stable source of earnings, or if your income fluctuates or is not consistent, you may have trouble getting a car loan from a variety of lenders. If you have an account with a local bank or perhaps a credit union, it might be possible to 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 speak directly to a loan officer or manager with authority to approve. The main benefit is that it may be easier to plead your case 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 car loan. If you have co-signers, the lender will also take a look at your co-signer’s credit history and income. The benefit of this can be the fact that your loan is much more likely to be approved. One drawback, however, is that the co-signer is also legally responsible for the vehicle loan. If you’re unable to make the payments, that could create friction between you. Have good grades. Similar to lenders factoring credit history, some lenders use the GPA as a measure of loan approval. If you have a high GPA you should consider sharing it with prospective lenders. Because while not all will take into account it, in certain cases, good grades could mean more competitive rates. What are the best places to look for cars as a student Much has changed regarding the method people buy and sell vehicles over the years, but one thing has remained the same -If you’re able to look around, you can often save money. The shorter time you have to research all choices, the less you’ll pay for the car you want to purchase. Friends and family Finding a purchase from a family member is likely to be a perfect scenario. If you purchase a car by someone whom you know limits the possibility that you’ll purchase an unsatisfactory product. Additionally, depending on who you’re buying it from, they might be willing to cut you an offer on the cost. Although this could be the ideal situation, if nobody has ever tried to sell their vehicle, you will be out of luck. Local car dealers While many instances have gone online, there is still a value in shopping around at local car dealers. Nearly all dealers have their inventory online , too, so you can see what cars are available before you head to the showroom to test drive. While making use of the internet to assist you with your search for a car makes a lot of sense for many, there are those who prefer seeing and experiencing the car in person. Online In addition to looking at the online sites of local used and new dealerships, there are many other . If you are interested in online buying, you can buy with security using marketplaces for used cars online, like or . Facebook Marketplace, Craigslist and eBay are among the sites on which you can find people selling their cars privately and other items, but keep an eye on what to watch for . Other expenses to keep in mind Remember that it’s not just the costs of your vehicle loan that will affect your budget. You must ensure that you have space for these other car-related costs as well. Registration and sales tax. The taxes and fees are different according to the state and local authority, so check and see how much they will cost you. Expected cost: Between $400 to $700 based on the state you live in as per . Insurance. The majority of states require that you have at minimum liability insurance. You can consult a number of different agents and brokers to find the coverage that is most suitable for your needs. Expected cost: Average of $1,771 depending on your state of residence, driving history , and the type of vehicle according to . Parking. Particularly if you’re a college student, you might need to pay for parking near or on campus. Expected cost: Average of $362 annually or $181 for a semester according to research conducted by several universities. Fuel. As prices for gas rise and the price of fuel could have a significant impact on your budget. Estimated cost: $3.84 per gallon at the close 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. You should ensure your budget is sufficient to cover these items. Expected cost: Average of $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 thought that it’s not the best option for you You have other options. Lease When you lease , you are given a vehicle to use for a predetermined duration and amount of miles. After the term of the lease, as long as 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 it back to your leasing provider and walk out. Because you don’t have ownership of the vehicle and you only have it for a certain periodof time, the monthly installment on a lease is usually less than that of a car loan. If you’d like to take it off at the end of the lease then you could, choose to, if you are allowed in the original lease agreement. Renting a car only require a car sporadically, you can consider hiring a car whenever you’re in need of one. While renting a vehicle is higher on a per-day basis than a car payment, if you only need a car a few times a year, it might prove to be more economical. If you’re renting a vehicle, you also don’t need to be concerned about maintenance costs or tax or charges. Car sharing is another option. signing up to an auto sharing service. Turo is a peer to peer car rental service, where you can rent cars directly from individuals. It will be similar in cost and convenience as renting a car from an organization. If you’re in a region where they’re supported, you can also sign up to an auto sharing service such as Car2Go or Zipcar. They typically require an annual or monthly membership and then allow users to rent cars at cheaper rates by the hour or throughout the day. The bottom line: While it can seem challenging to obtain auto loans for students in college, it is possible. Make sure you research the best car for you and consider the possibility of a co-signer if possible. It is also advisable to speak with various lenders to compare rates to find the most affordable deal. Consider all of the extra expenses that go when you own a car, and consider if you are able to get by with alternatives like rental, ride-sharing, or public transportation. Find out more
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The article was written by an expert contributor to Points and Miles.
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 the confidence to take control of their finances through providing concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.
Auto loans editor
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