To wonder how students are getting car finance?!

[FlyRobinFly]

Helping a 20 year old relative find a car. She's fallen out with her dad (horrific situation, not likely to be resolved any time soon) who would have usually supported her on this. She has £1500 saved up but with the way used car prices have gone she's not likely to get something safe and up to the high mileage she will be doing (in uni with placements all around the large county, hospital placements and night shifts etc). So she'd rather use the savings as a deposit and get finance. She's worked out she can afford £150 a month car finance payment over 5 years, and that's with taking into account other expenses (such as rent to her mum, insurance and car maintenance etc) and leaving wiggle room for spare income. Her part-time job income is £760.

She has a credit card of £300 which gets paid off in full every month and no other debt but cannot get approved for finance. Does she have any chance? We understand her income is low and lenders will raise their eyebrow seeing that she's a student with a part-time job - we get that, but what is frustrating her is that there are a few lads in her circle who were able to get finance for BMWs/Brand New Corsas etc. One got lucky and got a great apprenticeship at 16 and now earns well so that explains that but the others are all students too, working part-time and juggling gym memberships etc alongside their finance payment. So DD doesn't understand why she can't get approved for a 3/4 year old modest Toyota Aygo (having done her research this is what she wants). Are these lads likely to have guarantor loans with their parents? We understand that it's not our business and she doesn't want to ask her friends, but we are simply wondering if we are missing anything. It seems a false economy to pay a hard earned £1500 on some ancient car needing constant maintenance.

Basically asking if anybody's DC of a similar age has car finance and where they applied and how they cope with the payment? Thank you

*DN, I'm used to talking about my own DD on here hence the mistake!

Several of my nieces friends are driving brand new cars. Bought mostly via PCP & using the money from their SAAS payments to pay for it. They're the ones who are at uni but staying at home so no rent etc.

It really shouldn’t be frustrating that she knows people who have leased a brand new bmw with no income.
How does she think she is going to pay for the car between graduating and finding a job?

It’s the height of stupidity to encourage someone on very part time hours to take a car on finance.

You mention placements, is she a nursing/healthcare student? Does she receive a bursary monthly? I only ask as some specialist lenders will take this into consideration.

She may be falling short of finance lenders affordability calculations, they don't just take her outgoings into account but a standard cost of living calculation. These have increased across the market recently, so for a lot of lenders her part time income would be wiped out by the standard cost of living assumption built in to lenders affordability criteria.

Her deposit and vehicle choice should help, how much is she trying to borrow?

What lenders has she tried? Her age won't be helping, lots of lenders won't consider applicants under the age of 21/25.

There are a few specialist lenders she could try, although the rates will be higher than standard lenders. Zuto, Moneybarn, First Response, Car Finance 24/7.

Declaring her job income, bursary and deposit should help, and make sure she's not counting her general spending as an outgoing when declaring that, as that will be factored in for most lenders.

I think it’s the only way these days really, also important she’s safe and has something reliable that isn’t going to collapse on her. It’s alright buying an old banger with 150,000 miles on the clock but older cars can put insurance up and inevitably cost more as parts wear and things break. If she has family help who could help pay if all goes terribly wrong with her job, like worst case scenario, I’d go for it.

Please make sure she's seriously thought about how she can maintain not only her payments, but her insurance, maintenance and other commitments over the next 3-5 years though. So many lenders won't l

I would say go for bank loan over PCP wherever possible though

She earns £760 a month and plans to stay with her mum until she has a graduate job, her job will be NHS where you basically walk into a job after the degree. She loves her current part-time job and will be staying there until she has her full-time graduate job. Her outgoings are currently £200 a month and unlikely to increase anytime soon until she either moves out (won't be happening until has the graduate job) or actually GETS the car. Her savings are £1500 and it from looking online you're lucky to get a second-hand car less than 16 years old for that now with stupid mileage. She may as well throw the money down the drain doing that. I think she's being very responsible, she doesn't want something new and flashy, just reliable and safe.

Posted too soon!

So many lenders won't lend to students and younger age groups because they aren't responsible. Guaranteed way to destroy your credit rating very quickly. Those boys with the BMWs on PCP will learn that very, very quickly.

I know a few people who had to buy old bangers in the past couple of years (not judging them, mine is a 15 year old shitebox too) all of which are now write-offs or in the scrapheap. Notably my best friend spent £700 for the MOT on a 17 year old car only to have it written off by a taxi driver a week later, and the insurance said that the car was worth so little that they only gave her £1000, and she now cannot afford a new second hand car.

We went through cf247. 68 reg vw up. With 22k on clock.

2k down on her 0% cc while selling old car ..we pay £189 per month over 4 years with me paying £100. All in her name. Earned £150 a week as an after school nanny in term time. No proof requested.

If she earns £740 a month and her outgoings are £200 then why does she only have £1500 in saving? That’s less than 3 months of the extra money

In reality she’s not spending £200 a month. Maybe her rent to her mum is £200 and then she will be socialising, buying some food etc.

Trying to get a loan which is 20% of her income is crazy!! That’s before you factor in insurance, petrol, parking, rent, food, socialising.

It's one thing financing a brand new BMW on a part-time student income and definitely living beyond means. But a 3 year old Aygo, probably around £7500 (including £1500 deposit) paid off over 4 years for a girl who needs a reliable, safe runaround is something pretty different. What about my friend? Paying £700 for her old banger (bought a year prior) to get through its MOT only for it to be written off soon after, and insurance telling her they will only give her £1000 for it. She's now £700 out of pocket and is distraught because she desperately needs a car and the £1000 from the insurance will get her literally nothing outright.

She literally needs a car, to get to a previous placement she had to arrange a car share through a Facebook group, she found somebody in the same village commuting to that hospital luckily on the same shift pattern. It seems that the days of buying a nice little £1500 runaround that will last you 5 years are gone. We have looked extensively.

Does she need it right now? Why not just save up for another 3 months and then she'll have another 1500, if her earnings and outgoings are correct? Insurance could cost another 1500 too though... And then there's fuel. I suspect she hasn't thought through all the costs fully. I think she'd be better going for an older, cheaper car. Lots of people drive old cars - a 3 year old car is not necessary for safety or reliability. A 3 year old car is an expensive luxury that most working people can't afford, never mind students. High mileage is not a problem as long as it has been well maintained. A 15 year old car with say 150k miles that's had annual servicing should be fine. Old cars without service history or with low mileage are a bad idea.
These boy racers she knows are probably being paid for by their parents

Car prices have gone up massively since covid, and while the market is slowing, it's showing no sign of trending downwards at any meaningful rate. So yes, the days of a £1500 reliable car are definitely gone.

While your DN has a need for a vehicle, finance lenders also have a legal requirement to ensure they're lending responsibility. With the way the world is at the moment, and the affordable lending complaints becoming the new PPI money grab scheme, criteria everywhere has been tightened. I did already mention some specialist lenders she could try, but the reality is that regardless of how much she needs a vehicle, anyone lending to someone with £760 per month income would be taking a massive risk.

To be honest probably a 6 or 7 year old car will be fine but even that cannot be bought outright, it's simply not an option. She does need the car ASAP for several personal reasons too (family members she needs to visit and support). She just doesn't want to spend £1500 on something that may be written off in a year.

There was 'CarShop' that said she'd been pre-approved but they didn't even ask for affordability information! Just her budget and address/employment details so I presume they mean she's approved in theory but as soon as she does a proper application she'll be rejected so we obviously aren't bothering with them as her credit score will go down.

They're a broker, not a lender, so their pre-approval doesn't mean much. They'll have carried out a soft search which won't go on her file.

She's better to go direct to a lender, then she's not tied into the cars the broker choose for her.

Please don't worry too much about the myth surrounding her credit going down. Multiple searches don't look great, but people also have to search for finance. She will make a much bigger impact on her file by maintaining her outgoings.