Car finance for first-time drivers
Car finance for new drivers
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When you become a new driver, learning the ins and outs of financing a vehicle can feel overwhelming.
If you’ve just passed your test and are wondering how to make your car costs less eye-watering, then here’s everything you need to know about loans for first-time drivers.
What is car finance?
Essentially, car finance lets you get help with covering the cost of a vehicle – so you don’t have to pay everything upfront. In most cases, you’ll make a deposit, before switching to paying monthly instalments. Payment plans can be quite flexible, so you’ll be able to tailor your repayments to your needs.
What are the different types of car finance?
There are three main ways to get a car on finance for new drivers: a personal contract purchase (PCP), a hire purchase (HP), or a personal loan.
A PCP plan requires regular payments that enable you to use the vehicle like your own, but you’ll have to return it when the contract ends.
With an HP plan, the car will be yours once you’ve completed all payments. For this reason, HP payments can be higher per month than PCP ones.
If you choose a personal loan, you’ll simply borrow enough to cover the total cost of the car, and pay your lender back over time, just like with any loan.
How do you apply for car finance?
Once you have chosen your financing type, vehicle model, and loan provider, it’s time to make your application.
In most cases, you’ll simply need to provide your lender with personal information like your income and credit score. You may also need to prove your address and show salary records.
Once they have the details they need, your lender will run a few checks, and make a decision on your application.
Can first-time drivers get a car on finance?
Yes, first-time drivers can get a car on finance. However, younger drivers or those with no credit history may find it slightly harder to get their application accepted.
Can people under 18 get car finance?
Even though many new drivers pass their test aged 17, you cannot apply for car finance in the UK until you’re 18.
Should you get your first car on finance?
Financing can be useful for first-time drivers, especially as they won’t have any spare funds from selling a previous vehicle! It’s also an excellent option if you’d prefer to pay off your car in instalments instead of paying a lump sum. However, many first-time drivers find it tricky to prove that they’re reliable, especially if they’ve never borrowed money before.
Ultimately, the answer to this question will depend on your preferences as a new car owner, so try to do your research before you commit.
What costs do I need to consider as a first-time driver?
Once you’ve paid for your car, you’ll need to think about the costs of owning and running it.
The three non-negotiable costs are insurance, tax, and MOT. Tax and MOT coverage only require annual payments, but you’ll be charged monthly for insurance – which is why it’s worth considering different ways to lower your premium, such as a ‘black box’.
You’ll need to cover the cost of fuel, and any maintenance work your car needs, too. You might also want to pay for breakdown coverage for extra peace of mind.
*Representative Example – Personal Contract Purchase: Cash Price £15,000.00, Deposit £500.00, borrowing £14,500.00 over 4 years at 8.9% Representative APR (fixed). 47 monthly payments of £228.99 followed by a final payment of £7,560.00. Total cost of credit of £3,832.53 and total amount payable of £18,832.53. Based on 8,000 miles per annum, excess mileage charges will apply if this is exceeded. Finance subject to status 18+ only. We are a credit broker and not a lender. Magnitude Finance is a trading style of DSG Financial Services Ltd. DSG Financial Services Ltd is a company registered in England & Wales with a company number 02313903. Our VAT registration number is 511678843. DSG Financial Services Ltd is authorised and regulated by the Financial Conduct Authority under firm reference number 649675