Being a student is tough enough, and while you might be able to score discounts on entertainment and shopping, the same can’t be said for buying a car. Banks don’t tend to offer specific car loans for students. You’ll need to meet stringent lending requirements in order to borrow money to buy a vehicle in Australia.

Most students in Australia are neither property owners nor married, so buying a car is likely to be your biggest purchase to date. This is significant because students don’t often have expendable income.

Lenders make money on the interest and fees that they charge for loans, and the lowest interest and fees are typically reserved for the most reliable customers: applicants with excellent credit scores.

Some students may be able to borrow from the bank of mum and dad. However, if this isn’t an option, there are several things you’ll want to consider before diving straight into a loan application. 

Firstly, you ought to consider your credit score. Lenders will look at your credit score to determine your risk value when trying to get a loan, and this in turn affects your likelihood of approval and the rate you are offered.

A credit score is your personal financial history. It is shown as a number and is determined by numerous factors. Any single or multiple of these factors can bring down or increase your credit rating, so act carefully. These include:

• Your age and address
• Meeting bill payments on time/defaulting on bills
• The type of credit you have against your name (if any)
• Whether you meet your credit repayments/whether you default on credit repayments
• The number of credit enquiries you have issued
• Bankruptcy/personal insolvency

Can I get a car loan with no credit history?

Students that aren’t yet financially independent - never been employed, signed a tenancy agreement or paid bills - may have no credit score. While having no credit isn’t necessarily a bad thing, it also doesn’t appeal to lenders because they have no indication of your financial competency, and you may find that you are subject to the same struggles for approval and higher rates as someone with bad credit.

While you might be able to find car loans that don't require credit checks, most lenders will want to see your credit history. Be wary of lenders that offer “no credit check” loans, as they may turn out to be a scam.

As a student, you are unlikely to have built up enough of a credit history to warrant an excellent credit score. However, there are other ways of securing a low interest car loan if you can’t get an interest-free loan from your parents.

You may want to consider a guarantor car loan, which offers a secured loan that’s supported by an eligible guarantor.

A guarantor is a third party, typically a family member, who agrees to make repayments if the borrower defaults on their loan. There is less risk to the lender if someone stakes a loan application. Therefore, you may be more likely to be approved with a guarantor. Additionally, you might also be able to secure a better interest rate on your car loan.

RateCity’s car loan calculator can help you and your guarantor determine how much your student car loan repayments are going to be. It’s also important all parties involved understand their rights and responsibilities.

Peer-to-peer lending allows you to apply, and sometimes bid, for a personal loan that’s funded by investors and facilitated by a third party. The third party is most commonly an online based platform/marketplace.

Apply via a P2P platform and have your credit history, identity, employment and income assessed. If approved, you’ll be matched with one or more investors who will fund your loan. Interest rates are based on your credit score.

Dealer finance, also known as car finance, refers to a financial arrangement offered by car dealerships. It is a form of financing that allows you to purchase a vehicle through a loan or lease agreement facilitated by the dealership itself.

The dealership assists in arranging a loan or lease agreement on behalf of the buyer. The terms, rates and repayment options may vary based on the buyer's creditworthiness, the vehicle being purchased, and the specific dealership. 

Dealerships often have relationships with various financial institutions, such as banks or finance companies, which provide the funds for the loans or leases. These lenders may offer deals or promotions through the dealership.

Dealer finance can be a convenient one-stop solution for both vehicle selection and financing. The dealer may also complete all the necessary paperwork and offer finance options for students with low or no credit scores. 

However, it’s important to be aware of the potential pitfalls of dealer financing, compared with traditional car loans.

Some lenders in Australia won’t offer car loans to international students. You’ll want to check directly with a range of financial institutions before applying for a car loan. However, some international students may be able to obtain personal financing for non-permanent residents.

Temporary visa holders might find it more difficult to secure a personal loan than a permanent resident or Australian citizen because banks and lenders generally consider them to be higher risk customers. Much of this perceived risk stems from the uncertainty of whether a temporary resident will be able to pay off their loan before their visa lapses.

Owing to this speculative status, lenders may also require temporary residents to pay higher interest rates on loans. This is, however, dependent on individual financial situations and can differ between lenders.

Aside from the interest rate, you’ll want to be aware of the full terms and conditions of your car loan. It’s important to determine whether or not you’ll need to pay an upfront deposit or a balloon payment at the end of your loan term.

Once you’ve purchased your vehicle, you’ll need to ensure you’ve paid any necessary stamp duty, registered the car with the relevant authorities, and have compulsory third party (CTP) insurance. You may also want to consider taking out a comprehensive insurance policy, as at-fault accidents can be incredibly costly.

When buying a car insurance policy, consider calculating how much you’re likely to pay and asking your insurer about the features of the policy and how much your policy is likely to go up if you’re involved in an accident.