Can 18 year olds get car finance?

Can I Get Car Finance if I'm 18?

You’re finally 18! Becoming a legal adult is exciting, and one of the things that can make it even more exciting is getting a new car.

Of course, a new car costs money. Probably a lot more than you have. And, you’d rather not get a car that was on the road before you even existed. So, what do you do?

Well, you could consider car finance. But, can 18-year-olds even get car finance?

Yes, they can. Lawfully, you can get car finance when you are 18. But, without trying to sound like a parent; just because you can, doesn’t mean you should.

There are pros and cons to car finance, and in this article, we’ll be looking at the pros and cons of car finance, and what options are available to you as an 18-year-old.

young driver is sticking learner stickers on her car

What are the pros and cons of car finance?

There are loads of advantages to car finance; otherwise, it wouldn’t be so popular. For example;

  • It helps you pay for the car
    • This is quite an obvious one but an advantage nonetheless. Paying for a car outright at 18 probably isn’t an option so car finance is the most viable option.
  • You have fewer financial commitments
    •  Some people argue that getting car finance at a young age is the best time to get car finance. This is because you have no other outgoings so your car is the only thing you’ll have to worry about.
  • It helps build your credit score
    • As long as you make your payments on time, car finance will help improve your credit score. This means it’ll be much easier to be approved for finance in the future.
Mercedes CLS Class Green Driving

But, car finance isn’t for everyone, and you should really take into consideration the disadvantages as well. For example;

  • It can be pretty pricey
    • As an 18-year-old, the chances are you aren’t on the highest income. A lot of young people find that car finance burns a massive hole in their wallet.
  • The payments might be higher
    • Because you’re young, you probably don’t have much of a credit history. This means that the finance house can’t really tell whether you are going to make the payments on time. This means you could be considered a higher risk, and therefore your monthly payments could be higher.
  • You’re tied down by a financial commitment at a young age
    • While this might be a good thing for finance houses, it’s not always the best decision for you. We understand that you want a new car, who doesn’t? But it’s a big responsibility and you don’t want to miss out on Ayia Napa because you have to pay for your car.
Concerned about the problems related to Financing? Dive into our article which solves all of these problems

What finance options are available for an 18-year-old?

The finance options available to 18-year-olds are the same as a driver of any age. Those are;

Personal Contract Hire

Personal Contract Purchase

Hire Purchase

While they’re all similar, there are some differences that you should know about.

A personal contract hire is where you have a car for a set period of time, say 1 to 5 years, paying monthly payments. Once that time is up, you hand the car back.

A personal contract purchase offers you more flexibility at the end of the contract. You can either;
Pay off the minimum guaranteed future value and keep the car.

The minimum guaranteed future value (MGFV) is how much the car is expected to be worth at the end of the contract. This amount is pre-agreed at the start of your contract.

red vauxhall corsa

You can hand the car back and get a new one (subject to mileage and condition)
Or, you can part-exchange the vehicle. Any equity can go towards a deposit for a new car.
A hire purchase, however, is where you make monthly payments for a period of time. Once that time is up, you own the car.

So, you have three options to choose from. You can find out more about each of these by either clicking on the links above or by downloading our personal leasing eBook.

Will I need a guarantor to get approved for car finance?

There is a good chance, a very good chance in fact, that your vehicle broker, dealership or finance company will ask you to make sure you have a guarantor. This will boost your chances of being able to get finance and give them peace of mind.

What is a guarantor?

 

Good question.

A guarantor is someone who agrees to take on your monthly payments should you fail to meet them. So, if you miss a payment, the guarantor is expected to pay how much you owe. It’s usually used for landlords or by mortgage companies these days, but it’s not an uncommon concept.

Who can be my Guarantor?

Your guarantor has to be someone who;

  • Is 21 years old or over
  • Is not financially linked to you
  • Has a strong credit rating

Your guarantor will most likely be a family member or a close friend. However, it can be pretty much anyone as long as they agree to it.

It should be noted that being a guarantor is a big decision, and it’s not something that should be agreed at the last minute. Yourself and your guarantor need to think carefully before either of you sign anything. 

piggy bank with change surrounding it

Can an 18-year-old get finance without a guarantor?

 

There is a slim chance that you can get finance without a guarantor, but we can’t promise anything.

It really does depend on whether you can make the payments, and if the finance house believes you can as well. As I mentioned earlier, because you are young you probably don’t have much of a credit rating. This means that the finance house cannot be sure that you will make the payments on time. Unfortunately, it’s not something that can be helped and it’s through no fault of you own. But it could hinder your chances of getting car finance.

So yes, 18-year-olds can get car finance. However, there’s a good chance that you will be asked to provide a guarantor. Also, car finance is a big decision, and it’s a huge commitment so you really need to think about whether that is something you want to be tied to at such a young age.

Laughing young woman wearing sunglasses driving a car with her girl friend , close up profile view through the open window

Andrew Kirkley

Director at OSV Ltd
Andrew enjoys: Movies and travelling to new cities to explore different cultures.

Andrew has been in the motor trade for over 20 years. What he enjoys most about his job is the team spirit and the dedication of his work colleagues. He also appreciates the teams input in the improvement of the company.
Andrew Kirkley

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