Car finance for new drivers
Being a new driver often means being newer to credit too, and figuring out what lenders need from a first-time applicant can feel like a guessing game. This guide covers age requirements, what lenders look for from someone with a limited financial track record, why a guarantor is not needed for hire purchase, and how to put your best foot forward as a first-time applicant.
Generally yes, though most lenders, including AutoMoney Trust, need to see at least a little credit history before they can assess an application properly. This does not need to be a long history or a particularly impressive one. A completely empty credit file, with no record of managing any credit at all, is difficult for any lender to assess, since there is nothing to base a decision on.
The good news is that a small amount of credit history is easier to build than people often think, and does not require taking out a loan or credit card you do not need. For more on how lenders assess applications and what soft and hard searches involve, see our guide on credit checks for car finance.
Credit history is not just about loans and credit cards. Several everyday things contribute to your credit file and can be enough to give a lender something to assess:
If you have little or none of these yet, a mobile phone contract is often the quickest and most accessible way to start building a credit file, since approval criteria are generally less strict than for credit cards or loans. Even a few months of a positive record can be enough to give a lender something to work with.
Once you have some history in place, a soft search lets you check your eligibility without it affecting your credit file. For more on how this works, see our guide on credit checks for car finance.
You need to be at least 18 to enter into a credit agreement in the UK, including car finance. This applies regardless of when you passed your driving test, someone who passed at 17 will still need to wait until they turn 18 to take out finance in their own name.
Once you are 18, age itself is not necessarily a barrier. When considering car finance, young drivers will still need to meet the lender's eligibility and affordability requirements, including having sufficient income to support the repayments. Many 18 and 19 year olds successfully get car finance, the application process is the same as for any other adult applicant.
With a limited credit history to go on, lenders typically pay closer attention to:
AutoMoney Trust offers hire purchase finance from £4,000 to £25,000 over 36 to 84 months with no deposit required. For a full walkthrough of what information you will need and how the process works, see our guide on how to apply for car finance.
AutoMoney Trust does not require a guarantor on any application. Hire purchase is secured against the vehicle itself, the car belongs to us until the agreement is paid off, which means we do not need a second person to underwrite your application the way an unsecured personal loan or guarantor loan might.
This is one of the practical advantages of hire purchase for first-time applicants. You are not relying on a parent, family member, or friend being willing and able to act as guarantor, and you are not asking them to take on responsibility for your payments. Your application is assessed on your own income, outgoings, and circumstances.
If you have looked into guarantor loans elsewhere and would rather avoid involving someone else in your application, hire purchase with a direct lender is worth considering as an alternative. Check your eligibility on our apply for car finance page with a soft search that will not affect your credit file.
Being a student often means having a limited credit history and an income that looks different to a typical full-time salary, maintenance loans, part-time work, or a mix of both. Neither of these rules out car finance, provided you have at least some credit history in place (see above) and your overall income supports the repayments.
Students who are 18 or over can apply in the same way as any other first-time applicant. The same documents apply: proof of identity, proof of address, and evidence of income, which for a student might include a part-time job, a student loan statement, or support from family, depending on what the lender accepts as evidence of affordability.
A soft search, used at the initial eligibility stage, does not affect your credit score and is not visible to other lenders. This is particularly useful as a first-time applicant, since it lets you see whether you are likely to be approved, and roughly what for, before committing to a full application and the hard search that comes with it.
Once you do proceed with an agreement, making payments on time is one of the most effective ways to strengthen a thin credit history. A 36 to 84 month hire purchase agreement, paid consistently, can have a meaningful positive effect on your credit profile by the time it ends.
For more on this, see: How car finance can affect your credit score.
Once you have an idea of what you could be approved for, the next step is choosing a car that fits your budget once running costs are factored in. Insurance in particular tends to be the biggest additional cost for new drivers, and varies hugely depending on the car. Our guide on cheapest cars to insure for new drivers covers what to look for, including how insurance groups work and how to weigh up insurance cost alongside your finance payment.
Use our car finance calculator to see what monthly payments would look like for different loan amounts and terms before you start looking at specific cars.
AutoMoney Trust is a direct lender, regulated by the FCA under firm reference number 912573, offering hire purchase finance from £4,000 to £25,000 over 36 to 84 months with no deposit required, and no guarantor needed. We consider applications from people with poor credit and part-time income, provided you have at least some credit history in place and a regular income from employment. Check your eligibility on our apply for car finance page with a soft search that will not affect your credit file.
Car finance can affect your credit score positively or negatively depending on how you manage your agreement. Making regular, on-time payments can help build a positive credit history and demonstrate responsible borrowing, while late or missed payments can negatively affect your credit score and make it more difficult or expensive to access credit in the future.
If payments are not made on time, they may be reported to credit reference agencies, which can lower your credit score and make future borrowing more difficult or potentially more expensive.
When you apply for car finance, a lender may carry out a hard credit search, which appears on your credit file and can cause a small, temporary change to your credit score. This is a normal part of the application process and helps lenders assess whether finance is affordable and suitable for you.
For more information about how applications are assessed, read our guide on Credit Checks for Car Finance.
The main difference between fixed and variable car finance rates is whether the interest rate can change during your agreement. A fixed interest rate means your rate and monthly car finance payments stay the same throughout the finance term, giving you certainty over what you'll pay and making it easier to budget. In comparison, a variable interest rate can rise or fall over time, meaning your monthly payments may change.
AutoMoney Trust offers fixed-rate hire purchase car finance only, so you know exactly what your monthly repayments will be for the full term of your agreement. While fixed rates may sometimes be higher than an introductory variable rate, they provide protection against future interest rate rises and make it easier to plan your finances with confidence.
When comparing car finance options, it's important to consider not only the interest rate but also the APR, total amount payable, and the overall cost of borrowing. For more information read our guide on What Is Car Finance APR?.
The length of your car finance agreement can have a significant impact on both your monthly payments and the total cost of borrowing. Choosing a longer finance term, such as 60 or 84 months, spreads the cost of the vehicle over a greater number of payments. This can make your monthly payments more affordable, but it may mean you pay more interest overall throughout the agreement.
A shorter car finance term, such as 36 months, usually results in higher monthly payments because the balance is repaid over a shorter period. However, paying the agreement off sooner can reduce the overall amount of interest paid, making it a potentially lower-cost option over the full term.
When choosing the right finance term, it is important to consider your budget, monthly affordability, and how long you plan to keep the vehicle. The best option is one that allows you to comfortably manage your payments without putting unnecessary pressure on your finances.
AutoMoney Trust offers car finance terms from 36 to 84 months, giving you flexibility to choose an agreement that suits your circumstances. Use our car finance calculator to compare different term lengths and understand how your monthly payments and overall costs could change before applying.
Yes, if you finance your car with AutoMoney Trust, you'll need to maintain fully comprehensive insurance for the entire duration of your hire purchase agreement. This is because the vehicle remains the property of AutoMoney Trust until you've made your final repayment and ownership transfers to you.
Comprehensive car insurance provides protection against a range of situations, including accidental damage, theft, fire and third-party claims. Keeping the vehicle insured for the full duration of your agreement helps protect both you and the lender by ensuring the car remains covered throughout the finance term.
When budgeting for a financed car, it is important to consider insurance as part of your overall running costs. Fully comprehensive cover is often more expensive than third party or third party fire and theft insurance, so make sure you include this alongside your monthly finance payments, fuel, servicing, and other vehicle expenses.
Some drivers choose to consider GAP insurance, which can help cover the difference between your insurer's settlement value if the vehicle is written off and the remaining balance on your car finance agreement when the outstanding balance may be higher than the vehicle's market value.
