First Time Driver? Everything You Need To Know About Car Finance

If you’ve passed your driving test and you’re hoping to get on the road this year, you’ll likely be considering your options when it comes to car ownership. As a first time driver, or if it’s your first time financing a car, there are several things you need to know ahead of time. It may seem confusing, which is why we’ve put together this handy guide to help you through your first car finance application.

Can new drivers finance their first car?

Yes. In fact, many new drivers choose to finance  a car to let them get on the road as soon as possible. It gives them the chance to own a car without having to save for a long period, with only a deposit to pay. Finance for new drivers means that you can drive away your choice of model, with access to the huge array of cars available on the used car market. You’ll have to pass a credit check and you’ll need a regular income, but armed with those, finance is achievable for even the newest drivers.

Should I get my first car on finance?

Opting for car finance provides the opportunity to drive a new vehicle without a hefty upfront cost. Fixed monthly payments make budgeting more manageable, with you knowing what amount you’ll need to pay each month - really helpful if you’re a younger new driver, as you may face higher car insurance premiums. By buying on finance rather than with your limited cash pot, you can enjoy the perks of a reliable vehicle without a major financial burden upfront.

5 Things to know about your first car finance application

1. Your chance of approval doubles with a full driving licence

If you’re still learning to drive and have yet to pass your theory and practical driving tests, you may want to hold off on your application for now.

One of the lesser-known things about applying for car finance is that the type of driving licence you hold at time of application can impact your chances of success. Looking into our application data from 2023, it showed that those who apply with a full UK driving licence are more than twice as likely to be approved than those who apply on a provisional UK driving licence. 

So, if you’re looking to get organised with car finance, it may be worth holding off until you’ve passed your test. Lenders will accept a test certificate whilst you wait for your full licence to arrive, meaning you’ll be all ready to get out on the road once it comes in the post.

2. Your deposit amount doesn’t impact your chances of approval

Whilst the deposit amount may help with other types of financial applications, when it comes to car finance loans, this doesn’t have much impact on your application.

The vast majority of finance companies don’t require a deposit for you to obtain an acceptance for car finance. As with most things, there are pros and cons to applying for a no deposit car finance plan. If you’re keen to get on the road as soon as possible, a no deposit car finance loan may be your best choice. However, this will result in higher monthly payments than if you were to put down a sum of money. It really depends on your personal financial situation. Many lenders now offer no deposit options, giving you important flexibility.

3. Some lenders won’t consider applicants with part-time jobs

The number of hours you work each week can impact your application, in addition to your earnings. Whilst your finances are the main point of consideration when it comes to car finance, your employment contract also plays a role. Some lenders will be hesitant to offer finance to people who aren’t in full-time employment. 

However, even if you’re in part-time work, a general rule is that if you work 16 hours or more, some lenders will still consider your application, so make sure that you state this in your application.

If you work 30 hours or more, make sure you select full time when making an application. Some lenders won’t always accept applications from part-time workers.

4. Your credit history in the last six months is the most important thing

The most important part of your credit history is the last six months. There’s a big misconception that you can’t get car finance or will pay high interest rates if you’re someone with bad credit history. However, when it comes to your credit score there are varying degrees of what is deemed as ‘bad credit’. If you’ve only missed a payment once, this shouldn’t impact the rate you’re offered. If you’ve missed multiple payments, it will begin to start affecting your application success rate.

Interestingly, whilst credit issues will be on file for six years, in the eyes of a lender, the last six months usually has the most weighting. This means you can quickly improve your rating, so it may be worth waiting a few months to bring your score up before applying. Alternatively, you can apply for a bad credit car finance plan.

5. Lenders aren’t snooping on your purchases

Open banking is becoming more and more popular - but are they checking what you’re buying? The answer is not really. Open banking is becoming very common in the car finance industry, often being useful for those with limited credit history. Customers may feel uneasy and think lenders are snooping into their shopping history. However, they simply want to check that your account is in good working order - that you earn what you say you do and that there are no bounced direct debits.

Conclusion 

There are lots of options for financing your first car. By working on your recent credit rating, you can improve your chances of being accepted and tapping into the benefits of car finance, such as access to new cars and not having to pay a big deposit up front. Whether you’re a young driver or you don’t have a deposit to put down, there are still finance opportunities for you to explore.