Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Guide to student car finance
Ready to get behind the wheel of your own car? Find out how you can get a loan as a student.
Updated . What changed?
Having a car can make student life a lot more convenient, but finding the money to buy one can be hard. If you’re not able to save enough or you can’t ask your mum and dad for help, a car loan can help get you the car you want.
Find out how to get a car loan and compare your options below.
What's in this guide?
- Compare car finance options in New Zealand
- How does a car loan work?
- What type of car finance is available to students?
- What rates and fees do car lenders charge?
- How does the car finance process work?
- Tips for students on how to get car finance
- How you can compare car finance
- Ready to choose the perfect car?
Compare car finance options in New Zealand
How does a car loan work?
A car loan is a financing option that lets you purchase a new or used vehicle. Car loans are typically secured loans. This means the vehicle you’re purchasing is used as a guarantee for the loan. A secured loan will come with lower interest rates, but you will need to make sure the car you’re looking to buy meets the lender’s eligibility criteria. For instance, not all lenders will give you a loan if you’re buying a used car.
What type of car finance is available to students?
There are two main car loan types that you can choose between.
- Secured car loan. Usually, secured loans tend to have lower interest rates because the car you’re buying is attached to the loan as a guarantee. Lenders will usually place restrictions on what kind of car you can buy. For instance, the car may need to be under a certain age or in a certain condition. Check that your car will be eligible before applying.
- Unsecured personal loan. If you want to purchase an older car or also want to use the loan amount for something else, you can consider an unsecured personal loan. You will need to meet additional eligibility criteria for unsecured personal loans because they are more of a risk for lenders to take on. If you default on the loan, the bank has no security to possess. The interest rates are generally higher as well.
Compare different lenders in terms of features, loan term and rates.
What rates and fees do car lenders charge?
|Lender||Car loan amount||Rates and fees||More information|
|Admiral Finance||$1,000 to $50,000||13.95% – 23.95%, establishment fee $125 – $595.||More|
|AA Money||$5,000 to $75,000||From 8.95%, establishment fee $180 for members & $240 for non-members .||More|
|ASB||From $2,000 (unsecured)||12.95% and 19.95%, $99 establishment fee.||More|
|ANZ||$3,000 to $40,000||12.90% p.a, $0 no fee for application for full-time tertiary students with a Jumpstart account, $115 standard establishment fee.||More|
|Geneva Finance||$1,000 to $50,000||8.95% – 28.95% p.a, establishment fee of $50 to $695, loan administration fee of $2 weekly, $4 fortnightly or $8 monthly.||More|
|Harmoney||$2,000 to $50,000||6.99% — 29.99% p.a, $200 or $450 establishment fee.||More|
|Kiwibank||From $6,000||12.99%–18.95%, $240 establishment fee.||More|
|Lending Crowd||$2,000 to $200,000||6.49% – 16.78%, $250 – $1,450 establishment fee depending on the amount borrowed.||More|
|Swoosh Finance||$5,000 to $100,000||9.95% – 18.95% p.a., $240 establishment fee.||More|
|Westpac||$1,000 to $50,000||13.90%, $100 establishment fee.||More|
How does the car finance process work?
Finding a car loan to purchase your vehicle is pretty straightforward. Here’s how it works:
- Find your car. Look on car sales websites if you’re interested in a private sale or head to a dealership. Find a car that’s within your budget and of good quality.
- Compare your loan options. Once you have the car you want to buy, or even an idea of the sort of car you want, you can start comparing your loan options. Consider the interest rate, fees and features of the loan to find one that’s right for you.
- Check the eligibility criteria. Even if the loan sounds right, you may not meet the eligibility criteria. Lenders usually require you to be over 18, earning a regular income and to have some form of employment. Your car will also have to meet eligibility criteria.
- Consider pre-approval. If you haven’t decided exactly which car you want to buy, you can consider applying for pre-approval so you know how much of a budget you have to work with, which can also work well if you’re buying a car at an auction.
- Get your documents ready. The next step is sending through your application. Gather all the necessary documents, which includes a form of ID, payslips and information regarding your employment and finances (income, expenses and debt). If you’ve chosen your car, you need to submit the make, model and year, the VIN/chassis number, registration number and purchase price.
- Submit your application. Depending on the lender, you may receive an instant response. Other lenders may take a few days to review your application and fund your loan.
- Make your car purchase with the loan funds. Buying the car can happen in a few ways. The lender may pay the dealer/private seller on your behalf; you may be given a bank cheque to pay the seller or you may be given the funds to pay the seller directly. Cars bought from dealerships involve the lender paying on your behalf. If you’re sending the funds to the seller directly, the lender may need you both to sign a form.
Tips for students on how to get car finance
If you’re a student, you may be working part-time or casually, be on a lower income and you may have limited credit history. This can make it difficult to get a car loan. Use the guide below to find out how you can secure finance.
Build your credit history
You will need to have a good credit history to be considered for a car loan. It’s important you understand your credit history is determined by your financial management skills.
There are a few ways to start building your credit history:
- Pay your existing bills on time, including your phone and utility bills.
- Order a copy of your credit file: you can receive it free in 10 days.
- Don’t open and close credit accounts frequently, let them mature.
Check that the lender accepts your income type
You can acquire a car loan as a part-time or full-time student, depending on your income. It’s important to check whether the lender accepts your form of income, whether it be from casual work, permanent part-time work or StudyLink student allowance payments.
Confirm all the eligibility criteria
In most cases, you’ll need to be 18 years or older and a permanent New Zealand resident. The car you’re purchasing will also need to meet certain criteria. For example, it may need to be under a certain age or it may need to be in a certain condition. You can look here to find lenders who will consider you if you’re buying a used car.
Save as much money as you can for the deposit
Provide the biggest deposit you can for your car loan. Financial experts recommend you work on your upfront payment. A larger down payment demonstrates your financial ability and responsibility. It will also help reduce your monthly repayments and interest rates.
Consider opening a high-interest savings account to earn interest on your savings. Some of these accounts also have incentives for you to save regularly by awarding you bonus interest.
Consider a guarantor or co-borrower
Your guarantor will need to agree to take on the legal and financial responsibility for the debt incurred with your car loan if you fail to make the repayments. This is why it’s important for your guarantor to trust you and vice versa. You should make every effort to make your repayments, so your guarantor is never held responsible for the debt. If you’re opting for a joint personal loan, both of you will be responsible for repaying the debt. To ensure you make your repayments, use the Finder repayment calculator for an indication of your costs.
How you can compare car finance
When comparing student car loans, there are various things you need to consider:
- Interest rate. Check whether the rate is competitive but also consider whether you want to opt for a fixed or variable rate. A fixed rate keeps your repayments the same for the entire loan team, but fixed loans tend to come with more restrictions on repayments. Variable rates may change, but you get repayment flexibility. For instance, with variable rates you can pay off the loan ahead of time or make additional repayments.
- Fees. Take a look at the upfront and ongoing fees to get an idea of how much the loan will cost you. Then, use a car loan repayment calculator to see how much your repayments will be.
- Repayment flexibility. Are you able to choose how often you make repayments? Can you make additional repayments without penalty? Can you repay the loan early without penalty? These are things to look out for.
- Features. Does the loan offer any additional features? Some of these may include a redraw facility for additional repayments, pre-approval, online account management, a car-buying service to help you find your car, or discounts on other products and services.
Ready to choose the perfect car?
Since this is your first car purchase, you may want to stick to an economy car. It’s easier for a lender to give you a car loan for an economy car rather than a luxury model, not to mention the running costs.
- Shop around
- Attempt to haggle or bargain with car yards
- Ensure the vehicle you want meets the loan requirements
- Buy the first car you see
- Apply for the first loan you find
- Apply for many loans at once
Ask an Expert