How To Buy A Car As A Student

If you’re a college student looking to buy a car, you may have found it a bit more challenging than you expected. While car loans for college students exist, many lenders are wary of lending money to first-time car buyers or those with limited credit history. Still, college student car loans are possible — especially if you have a reliable source of income, good grades or a trusted friend or family member to co-sign for you.

Where to find student car loans

You’re most likely to find car loans for students through your local bank or credit union. Generally, credit unions have the most flexible criteria for borrowers with little or no credit, and they often offer the best rates. Regional banks are similar, especially if you already have an account. Plus, you’ll be able to ask questions and get help in person if you need it.

Online lenders are convenient if you’re confident that you understand the steps to taking out an auto loan. They typically have less strict eligibility requirements, but they can have higher annual percentage rates (APRs) for buyers without excellent credit. The quality of customer support can also vary widely.

Finally, car dealerships offer financing, but these are not the best car loans for students. Dealer rates are high because they act as a middleman, connecting you with a lender. To increase their profit, they add a margin to the APR that the lender offers you. Their high-pressure sales tactics can also be overwhelming for a first-time car buyer.

Quick review: How auto loans work

An auto loan lets you borrow money from a lender specifically to purchase a vehicle. Borrowers then pay that amount back with interest in equal monthly payments over the length of the loan. These loans typically consider credit score, income and debt-to-income ratio to determine which rates the borrower qualifies for. Outside of looking for student-specific auto loan programs, which some financial institutions offer, look for lenders with flexible acceptance criteria.

For instance, the lender may allow you to add a cosigner, or it might have less stringent income requirements. Some lenders also use a good GPA to help determine eligibility or use good grades for perks like discounts and lower interest rates. It is also smart to look out for lenders with additional discounts available, like no fees or flexible loan terms, to keep payments low.

If you don’t already have a budget, make a list of your monthly income and expenses to help you calculate how much car you can afford. As a general rule, you want to keep your vehicle expenses at or below 10 percent of your budget. You can control your auto loan costs by:

• Choosing a certified pre-owned (CPO) vehicle.
• Selecting a lower trim model.
• Skipping pricey add-ons and extra features.
• Making a larger down payment.
• Choosing a shorter loan term.
• Comparing lenders thoroughly.
• Paying attention to the total cost of the loan.
• Shopping insurance options regularly.

How to buy a car as a college student

Even if you’re a student or someone else with a limited credit history, there are options to finance a car. While you may not have as many options as someone with a long-established job and credit history, it is possible.

1. Figure out a realistic budget. Use a car payment calculator to determine how much you can afford to spend each month. When budgeting, focus on the vehicle’s out-the-door price rather than just the sticker price.
2. Save for a down payment. While saving for a down payment could be challenging as a student, it can mean lower rates and monthly payments. If you have time to wait, the best-case scenario is to save at least 20 percent of the purchase price. But even if you can’t afford that amount, aim for at least a small down payment.
3. Lock in financing. It is smart to apply for loan prequalification ahead of car shopping — in person or online — to ensure you know the amount you can afford and to skip out on dealership markups. Depending on the lender, prequalification will mean a soft credit pull. You should also be prepared to share the necessary documentation to confirm the information you provide.
4. Negotiate. Negotiating with a dealer can be very intimidating, especially for a young person. When buying a car as a student, it is wise to bring an experienced friend or family member with you. This way, you feel more confident to push for the deal you deserve. But no matter what, remain confident and do not be afraid to walk away.

The process of finding a car loan as a student looks just like the process would for a postgraduate driver looking for financing, but since you may be on a tighter budget, finding a good deal matters. This is even more true as the average monthly payment for a used car reached $529 in the second quarter of 2025. New cars have even steeper monthly payments at $749, according to Experian.

Unique challenges for students

As a college student, securing a car loan is not as simple as it might be for a driver with a more firmly established credit history and salary to show lenders. The majority of lenders use an applicant’s credit score and history as a measure of borrowers’ ability to pay off their loans. Without that, students wanting a car will face a number of challenges.

Little to no credit history

As a college student, it is unlikely that you have an extensive history of credit under your belt. And with the length of your credit history making up 15 percent of your FICO credit score, this can be challenging to overcome.

One workaround here is to add a co-signer. Adding a trusted co-signer who has a more lengthy history of credit and higher credit score can help your approval odds. Keep in mind that your co-signer is also legally responsible for your car loan. If you’re not able to make the payments, it could cause friction in your relationship.

Another option is to start building credit as you save for your down payment. There are many tools on the market to help you build credit without debt, such as secured credit cards and credit-builder loans. There are also apps that help you report expenses like your utilities or phone bill to the major credit bureaus to improve your credit score.

Lack of income

Lenders also like to see regular income to prove that you can handle the monthly payments. If you’re in school, you might have fluctuating income depending on how much you work during a given semester. Adding a full-time working co-signer can help prove that someone with dependable income is backing the loan.

Higher interest rates

The combination of short credit history and low income can result in steep interest rates, even if you can qualify on your own. Lenders primarily use credit and income as determining factors for your auto loan interest rates. This means that you might be stuck with high rates, which can mean more expensive monthly payments.

How to improve your chances of loan approval

As with any loan, the most competitive rates, terms and acceptance are given to those with strong credit. And as a student with a small amount of credit history, approval can be a challenge. But there are a number of ways to improve your chances of approval when you’re buying a car as a student.

• Show a reliable source of income: The best way to get a car loan as a student is to show a reliable source of income to prove you can make the loan’s monthly payment. If you have a job and a history of at least a few months of income, you will increase your chances of being approved.
• Talk with banks or credit unions where you already have accounts: If you don’t have a reliable source of income, or your income is seasonal or erratic, you may have trouble getting a car loan from most lenders. If you have an account with a local bank or credit union, you might reach out to it. It may offer student car loans or other programs targeted at people in your situation.
• Get a co-signer: Another option is to get a trusted friend or family member who boasts high credit, income or longer employment history to co-sign for your car loan. When you have a co-signer, the lender will also look at your co-signer’s credit history and income.
• Get good grades: Similar to lenders considering credit history, a rare few lenders say they’ll use your GPA as a measure of creditworthiness. If you carry a strong GPA, consider sharing that with potential lenders. Because while not all will factor it, in some cases, good grades could mean more competitive rates or discounts.

Bottom line

While it can seem challenging to get car loans for college students, it is possible. Do your homework to find a good car and explore getting a co-signer, if possible. You’ll also want to talk with various lenders to compare rates and find the best possible deal.