The hard part is over, now you’re free to drive off into the sunset. You need a car, first, of course.
If you are looking for a new car, you might be looking at leasing. Leasing has become increasingly popular over the years, and it’s understandable why. It is also understandable why you, as a young driver, would be attracted to the idea of leasing. After all, you can get a brand new car for low monthly payments, what’s not to like about it?
However, car leasing for young drivers is not as easy as it looks. That’s not to say it’s impossible, but there are some things that you should consider first.
In this article, we look at car leasing for young drivers including whether you can lease, how to get car finance and whether you should look at using a guarantor.
Can a young driver lease a car?
There is no reason why a young driver cannot lease a car, as long as you have a valid UK driving licence then, of course, you can lease a car.
However, as we said, it’s not as easy as it looks. To qualify for car finance, you will have to undergo a credit check. The finance house will look at your credit history and base whether you qualify for car finance off of that. The problem is, as a young person, you probably don’t have much of a credit history if one at all. Unfortunately, having little or no credit history can be as bad as having a poor credit history. If there is no credit history to look at, the finance house can’t be sure you are going to make the monthly payments.
This is through no fault of your own and is simply how things have worked out. As a young person, you won’t have many financial commitments and therefore don’t have much of a credit history. This means that it will be harder for you to qualify for car finance. However, it’s not all doom and gloom, and there are ways around this. You can always look at using a guarantor.
What is a guarantor?
You may have heard of a guarantor before, particularly in the context of renting or buying a home. A guarantor is simply someone who agrees to take on the monthly payments should you fail to make them. Using a guarantor will greatly increase your chances of getting car finance, so we do recommend that you look into this option.
Your guarantor will;
- Be 21 years old or older
- Have a good credit history
- Not be financially linked to you
Many people use their parents or older siblings, but it can pretty much be anyone you trust to make the monthly payments should you fail to do so.
There is a good chance that you will be asked to provide a guarantor if you are a young driver. This is so the finance house has the security of knowing someone else can take on the monthly payments. You can read more about getting car finance with a guarantor here.
Can a young driver get car finance without a guarantor?
There is still a very slim chance that you can get car finance without a guarantor if you are a young driver. However, this slim chance is very slim, and we can’t guarantee that this will happen. It does all come down to the monthly payments, and whether the finance house thinks that you can comfortably make the monthly payments. If they are confident that you can, then you could qualify for car finance without a guarantor. However, we always recommend that young drivers look at a guarantor, it makes the whole process easier and you have more chance of getting approved for car finance if you use a guarantor. For more information about guarantors for young drivers click here.
Is car leasing for young drivers a good idea?
Now we’ve established whether young drivers can lease a car, is it even a good idea?
Leasing is a big responsibility and it’s a big decision that you should think about carefully. Here are some of the reasons why it might be a good idea;
- You get a brand new car
- This comes with heaps of advantages including;
- It will be in warranty
- New cars are safer and often come with more safety technology
- They are more economical
- They emit less CO2 than older cars
- They are more reliable
- There is more technology that enables for distraction-free driving (this includes hands-free systems and built-in sat-navs)
- This comes with heaps of advantages including;
- You have fewer financial commitments
- In theory, leasing a car as a young person is the best time to do it because you don’t have other financial commitments. Older drivers have mortgages or rent to pay as well as other financial commitments that a young driver probably doesn’t have.
- It helps build your credit score
- You can improve and build your credit score by making the payments on time, making it easier to lease a car and take out loans in the future.
So those are some of the reasons why car leasing for young drivers is a good idea, and it is easy to see why it is so appealing to many young drivers and their parents. However, there are some negatives to car leasing, just as there is with every option for getting a car. These include;
- It might be more expensive
- This is because the finance house needs to be sure that they are going to get their monthly payments, so it could be more expensive than you first thought
- Insurance will be pricier
- When you lease a car, you have to get fully comprehensive insurance. This is naturally more expensive than standard third party insurance, and it will cost more if you are a young driver because you are a higher risk
- You have to make monthly payments
- For some young drivers, this isn’t an issue. However, other young drivers might not like the idea of that much money coming out of their account every month, especially if you could be spending it on something else
- You are bound by a contract
- If you want to go travelling or go to University and leave your car at home, you can’t simply cancel your contract. Lease contracts aren’t designed to be ended early, so you would normally need to commit to 2-3 years.
Car leasing for young drivers is a good idea for certain situations, but it is a bad idea for others. It really does depend on your individual situation and whether you are happy to commit to 2-3 years of monthly payments.
What car leasing options are there for young drivers?
There are two options for you in terms of car leasing for young drivers. They are;
- Personal Contract Hire
- Personal Contract Purchase
What is Personal Contract Hire?
Personal Contract Hire is one of the most common forms of leasing and is what many people are talking about when they talk about leasing.
Personal Contract Hire is where you have a car for a number of years, usually 2 to 3 years while paying fixed monthly payments. Once that time is up, you hand the car back with nothing more to pay. With Personal Contract Hire, you have to stick to a pre-agreed mileage and you also have to keep the car in good condition, in line with the BVRLA Fair Wear and Tear Guide. You can read more about Personal Contract Hire here.
What is Personal Contract Purchase?
Personal Contract Purchase works in the same way as Personal Contract Hire for the duration of the contract. However, at the end of the contract, you have three options;
- Hand the car back with nothing more to pay
- Subject to mileage and condition restrictions, as per Personal Contract Hire
- Buy the car for a pre-agreed amount
- This is called the Guaranteed Future Value and is set at the beginning of the contract
- Part-exchange the car
This option is great if you aren’t sure what you are going to do at the end of the contract as you don’t have to decide until a few months before the contract is up. You can read more about Personal Contract Purchase here.
What are the alternatives to car leasing?
If you have decided that maybe car leasing isn’t for you as a young driver, then there are other options for you.
If you don’t want to lease but like the idea of making monthly payments, then you could always look at a Hire Purchase. This is where you make monthly payments for up to 5 years and then at the end of those 5 years, you own the car. There are no mileage or condition restrictions on a Hire Purchase.
Alternatively, you can look at getting a second-hand car. There are loads of places you can get a second-hand car these days, and this is a popular option for many young drivers. You can read our article on getting a new car vs. a used car as your first car by clicking below.
In conclusion, car leasing for young drivers is slightly more complex than car leasing for experienced drivers. This is mainly down to the fact that to get approved for car finance, you need a good and substantial credit history. As a young person, the chances are you don’t have much of a credit score in the first place. Therefore, it can make getting car finance more difficult. However, you can increase your chances of getting car finance if you use a guarantor. There are many advantages to car leasing for young drivers including the fact that you get a safer, more reliable car that is also in warranty. However, it isn’t for everyone. Whether you choose to lease a car is down to you and whether it would suit your individual situation.