Guarantor car finance

How guarantor car finance can help young drivers get affordable credit

BuyaCar team
Aug 20, 2018

Being accepted for car finance can make the difference between driving around in a clapped-out old car or getting a modern, safe and reliable vehicle.

But if you're a young driver who's not borrowed money before, it can be difficult to convince lenders that you'll make your payments on time.

That's where guarantor finance comes in. It involves adding a friend or family member to your application. They'll need to trust you because they will be responsible for repaying your loan if you don't. With a guarantor on board, lenders are more likely to accept a finance application from many young drivers.

Guarantor finance is available for new and used cars. It can be used in conjunction with new car offers, such as free insurance or Just Add Fuel deals, which include insurance, finance and servicing for one monthly payment.

It’s not designed for anyone who's struggling with money, as unpaid finance will affect the credit history of a borrower and guarantor.


How does guarantor car finance work?

Whether you’re just starting your first job, or live miles from the nearest bus route, guarantor finance can help put you behind the wheel of a car at a reasonable price.

The guarantor is effectively a safety net for lenders, providing greater reassurance that finance will be repaid in full and on time. 

That’s why guarantors need to be seen as reliable, with a strong history of repaying debt such as credit card or mortgage bills on time. They’ll usually need to own their own home too.

Most importantly, guarantors must be willing to take on the responsibility of your car finance, guaranteeing that they will repay it if you fail to make your monthly instalments. That’s why guarantors are either friends of family members.

In most cases, guarantors should have nothing to do once the agreement has been signed. As long as the payments are made on time, the finance will be cleared.


Apply for guarantor finance

Many young drivers will be accepted for finance on their own, without the need for a guarantor, so it's best to find a car that you like and then apply for finance in your name. If you choose to do this with BuyaCar, your application will be assessed and you'll be advised if a guarantor is needed to improve your chances of being accepted.

BuyaCar works with a panel of lenders which offer guarantor car finance. To find out more, call 0800 050 2333.


Guarantor car finance for young drivers

If you’re a young driver, without much history of borrowing and repaying debt, then it’s common to use guarantor finance to get a car - often to travel to work. In this situation, a parent will usually act as a guarantor.

Making repayments on time will improve your credit score, which could mean that a guarantor is not needed when you next apply for finance.

If you can afford the payments on a new car, then guarantors can be used to take out finance on a car that comes with free insurance. They can can also be used with new car Just Add Fuel deals, which makes it easier to budget by including most running costs and your finance repayments in a single, fixed, monthly instalment.


Guarantor PCP and HP finance

The two most popular types of car finance are available with a guarantor, offering plenty of flexibility around your deposit, monthly payment, and what happens at the end of the agreement

Guarantor Personal Contract Purchase (PCP) finance is a cheap way of driving a new or used car because your monthly instalments don’t cover the full price. This may mean that you can afford a better or more modern car.

It also means that you won’t own the vehicle at the end. You’ll have the option to buy it for an amount that’s set before the agreement begins, or to simply hand the car back. In many cases - if the car’s value is high enough - you’ll be able to trade it in and use it as the deposit for finance on another car.

Guarantor Hire Purchase (HP) finance makes you the owner of the car once you have made the final payment. The cost of the car, plus interest payments, are divided into fixed monthly instalments, which makes them more expensive than PCP repayments.


Guarantor car finance for 17-year-olds

Car finance isn’t available if you’re under 18, with or without a guarantor. If you don’t have the funds to buy a car with cash, then it’s still worth saving. This will enable you to put down a larger deposit when you do turn 18, reducing your monthly payments, and potentially lowering your interest rate.


Guarantor car finance for 18-year-olds

From your 18th birthday, a range of finance options are available to you, including the PCP and HP finance detailed above, as well as deals, such as Just Add Fuel if you’re after a new car and a simpler way of managing running costs.

It's certainly possible to take out finance at the age of 18 without a guarantor. This is likely if you have a regular income and are listed on the electoral roll, which links you with a permanent address.

But many 18-year-olds find that their lack of credit history works against them and, in this case, a guarantor can help. 

Making your repayments on time can help to build up your credit score, and improve your finance options in future, so it’s worth ensuring that you’ll be able to afford your repayments throughout the agreement, when you might be headed to university, for example.


Guarantor car finance for 19-20 year-olds

By the time you reach the end of your teenage years, you may have a growing history of repaying debts, such as credit cards, on time. Combined with a regular income and registration on the electoral roll, you've got every chance of securing car finance at a low rate.

However, your credit score may still be weak, so a guarantor could still be required.


What happens if you stop repaying guarantor car finance?

Missing finance repayments can affect your credit score, whether there’s a guarantor involved or not. It’s always best to get in touch with your lender if you’re not going to be able to make a repayment.

If you do miss a payment, then the lender may contact you to check that there hasn’t been an error, or whether there’s an emergency or change in circumstances that has affected your ability to pay.

It may be possible to arrange a new repayment plan, but this will depend on the policy of your lender; the earlier you get in touch with them, the better.

At all times, the lender can chase the guarantor for unpaid debt, as they are legally responsible. If the guarantor fails to repay, then the car can be seized; both you and the guarantor may also end up in court, with the threat of County Court Judgements.


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