There are encouraging signs that the economy is getting back on track with the Financial and Leasing Association (FSA) announcing that car loans from banks had increased 22% in 2012 from last year. That said, it is still difficult for young drivers to get a loan from the bank. Being young, your credit rating is usually low or non-existent so getting on the road can be a problem. There are a few options though.
Dealer Finance Packages
A lot of car dealers will offer monthly pay up deals on their cars; these deals are particularly prevalent among nifty little hatchbacks like the Seat Ibiza, Hyundai i30 and the new VW Polo. A quick Google search can find these deals coming in at around £150 per month but it may be worth asking your local dealer about any price you find online as they may be willing to price-match or even offer a better deal.
There are many finance companies out there just dying to offer you money but always check the interest rates. Secured loans from reputable providers tend to be the best options, rates usually starting at around 9.5% APR, but these loans often require collateral. If your parents trust your financial acumen, don’t laugh – it can happen, they may consider a homeowner loan where their property is used as collateral for the loan; so long as you keep up the repayments everything is grand… though it may take your dad some convincing.
Car Finance by Proxy
There are a few companies out there who will offer finance on a car that a dealer will not. So, say you have your eye on a beauty of a motor at your local garage but the owner is of the old school cash-up-front mentality, these companies will pay for the car then you pay it back through their finance package. As with secured loans the interest rates can fluctuate wildly from provider to provider; so shop around to get the best deal.
Loans to Avoid
Borrowing from friends is never a good idea. You know how much of a hassle owing a mate £10 from the last time you were short at KFC can be – imagine how much of pain they’ll be if you owe them closer to a grand?
Payday loans are also no solution when it comes to this sort of financing. I won’t debate the morality of loans than can reach 2000%APR here but, suffice to say, missing your payments on a decent amount of cash at these sorts of rates has the potential leave you in deep trouble.