Compare Car Finance for Young Drivers

What Are the Different Types of Car Finance for Young Drivers?

As a young driver, you have several options when it comes to financing your first car:

1. Personal Contract Purchase (PCP): PCP is a popular choice among young drivers. You pay an initial deposit followed by monthly instalments for a fixed term. At the end of the contract, you can return the car, make a final payment to own it, or trade it in for a new vehicle.
2. Hire Purchase (HP): With Hire purchase agreement, you pay a deposit and then make fixed monthly payments over an agreed term. Once you've made all the payments, you own the car outright. This option is ideal if you want to eventually own the vehicle.
3. Personal Loan: A personal loan allows you to borrow a fixed amount from a bank or lender, which you then repay in monthly instalments over a set term. You own the car from the start, giving you more flexibility than other finance options.
4. Guarantor Loan: If you have a limited credit history or a low credit score, a guarantor loan could help you secure car finance. A parent or guardian with a good credit history co-signs the loan credit agreement, agreeing to make repayments if you cannot.

What Are the Cheapest Cars to Insure for Young Drivers?

Insurance is one of the biggest expenses for young drivers. To keep costs down, consider choosing a car that's cheap to insure. Some of the most affordable cars for young drivers include:

1. Volkswagen Polo
2. Ford Fiesta
3. Vauxhall Corsa
4. Renault Clio
5. Fiat 500

These cars are typically cheaper to insure due to their smaller engines, lower repair costs, and good safety ratings. However, always compare insurance quotes for specific models before making a decision.

Tip: Look for cars in lower insurance groups. These are typically cheaper to insure for young drivers.

Why Would You Be Refused Car Finance?

There are several reasons why you might be refused car finance as a young driver:

1. Poor credit history: If you have a low credit score or a history of missed payments, lenders may view you as a high-risk borrower and refuse your application.
2. Insufficient income: Lenders need to see that you have a stable income and can afford the monthly repayments. If your income is too low or you have a lot of existing debt, you may be refused finance.
3. Age of the vehicle: Some lenders have restrictions on the age of the car they'll finance. If you're looking to finance an older vehicle, you may struggle to find a lender willing to approve your application.
4. Incomplete application: Make sure you provide all the necessary documentation and information when applying for car finance. An incomplete application may be refused outright.

If you're refused car finance, don't lose hope. Take steps to improve your credit score, save for a larger deposit, and shop around for specialist lenders who may be more willing to approve your application.

Is Car Finance Available for 19 and 20-Year-Olds?

Yes, car finance is available for 19 and 20-year-olds, but you may face some of the same challenges as an 18-year-old. Lenders will still consider factors such as your credit history, income, and affordability when deciding whether to approve your application.

However, as you get older and gain more financial stability, you may find it easier to secure car finance. For example, a 20-year-old with a steady income and a year or two of credit history may be viewed more favourably than an 18-year-old with no credit history at all.

To increase your chances of approval and get the best car finance deals as a young driver, follow the tips outlined earlier, such as saving a larger deposit, choosing an affordable car, and considering a guarantor loan if necessary.

Is a Personal Contract Hire (PCH) Agreement Right for New Drivers?

Personal Contract Hire (PCH) is a type of car leasing agreement that may be an option for new drivers. With PCH, you make fixed monthly payments to lease a car for a set period, usually 2-4 years. At the end of the agreement, you simply return the car to the leasing company.

PCH can be an attractive option for new drivers because:

1. Lower monthly payments: Since you're only paying for the depreciation of the car rather than its full value, monthly payments are often lower than with other finance options.
2. Maintenance and servicing: Many PCH agreements include maintenance and servicing costs, making it easier to budget and manage the expenses associated with running a car.
3. Access to newer cars: PCH allows you to drive a newer car that might otherwise be out of your budget.

However, there are some drawbacks to consider:

1. No ownership: With PCH, you never own the car. This means you can't sell it or modify it, and you'll need to find another car at the end of the agreement.
2. Mileage restrictions: Most PCH agreements come with annual mileage limits. If you exceed these limits, you'll face additional charges.
3. Credit checks: As with any finance agreement, you'll need to pass a credit check to be approved for PCH. New drivers with limited credit histories may find it more challenging to be approved.

Ultimately, whether PCH is right for you as a new driver will depend on your personal circumstances and preferences. It's important to carefully consider the pros and cons and compare PCH with other finance options before making a decision.