Most auto financing decisions are based on your credit score, down payment size, and income. For many students, this can present a challenge. While it’s certainly possible to finance a car while you’re still in school, there are risks and responsibilities to consider.

1. The role of credit, down payment size, and income

If you’re new to credit, your credit score  — how financial institutions determine your worthiness —  may be low or nonexistent. That can result in higher interest rates or even difficulty getting approved.

Building credit before applying for auto financing, even as an authorized user on a family member’s account, can help. Reviewing your credit report and addressing any errors early on is also a good idea.

You’ll additionally need to demonstrate a reliable income. A steady part-time job, paid internship, or consistent seasonal work may be enough to show you can cover monthly payments. But because income may be limited during the school year, those you seek financing from might offer less money than you expect.

You can offset this with a solid down payment, one that’s ideally 10-20% of the vehicle’s cost. Saving this much can improve your approval chances and reduce your overall financial burden. That’s because the more you put down, the more you lower your monthly payment — and the risk an auto financing provider sees in you.

2. How to choose the right vehicle for your budget

A car doesn’t need to be new or high-end to meet your short-term needs. Selecting an affordable, reliable vehicle — preferably a used one — helps limit the financed amount and keeps monthly payments more manageable.

Before committing to a car, consider the total cost of ownership. That includes insurance (which tends to be more expensive for younger drivers), fuel, maintenance, repairs, and parking. Plan accordingly, as these added expenses can strain a student's budget.

3. Student-friendly financing options

When shopping around for financing, take the time to compare offers from banks, credit unions, fintech companies, and any student-focused auto financing programs. Each will have different terms, requirements, and interest rates.

Some financing providers may also offer discounts or perks to students, especially those with strong academic performance. Maintaining a good GPA might even help you secure a lower interest rate.

Lastly, convincing a family member with strong credit to become a co-signer can improve your financing terms significantly. Just remember, co-signers are equally responsible for your debt; if you miss a payment, they’re on the hook for it.

4. The potential risks

Having a limited credit history and income can result in higher borrowing costs. Financing for students often comes with caps between $15,000 - $20,000, restricting your vehicle options. Long-term repayment obligations could also impact your future ability to get a credit card, apartment, or mortgage.

You should also know that auto financing is typically secured, meaning the vehicle you’re making payments on is the collateral. If you stop making payments, a financial institution can repossess your vehicle. That kind of default harms your credit, which can take years to recover from.

Despite the temptation, avoid using a student loan to buy a car. Doing so can violate the terms of your financing agreement, increase your debt load unnecessarily, and result in long-term financial strain.

The first thing you’ll want to do

Once you’re ready to explore financing options, Credit Acceptance works with more than 15,000 participating dealerships coast-to-coast. Pre-qualification through our website will give you an idea of how much you can borrow. See what you pre-qualify for now!