4 ways to buy your first car as a graduate without a credit score

So, you have finally entered adulthood. You have secured your first job, and the next most fitting thing to do is buy yourself a car. Having a car gives you a sense of freedom. You can go wherever you want to go and do whatever you want without worrying about the safety of public transportation or being an inconvenience to others. It will also make your new working life easier to navigate. For most people in South Africa, after buying a home, a car is the next costly expense that usually requires financial assistance. This realisation is where people hit a brick wall because you realise that since you are a recent graduate, you cannot get car finance without a credit history. 

This a sad reality for most people; however, there is a way for you to finance a car where credit history is not essential. Find out how below. 

Don’t consider a co-signer 

Lenders who offer car loans need proof of what kind of payer you are, which is why your credit score is vital. Your three-digit score helps creditors determine how reliable you are and whether or not they can enter into a loan agreement with you. If you have a non-existent credit score, chances are a lender will decline your application for a car loan. This is to ensure they don’t potentially give a high-risk borrower a large loan amount that won’t be repaid. But, there is a way to get a car loan with no credit history, which is through a co-signer. 

A co-signer is someone who can take the vehicle finance on your behalf. They will then take on the legal obligation of the loan, which in turn helps lower the potential risk a credit provider sees. While this is an effective way of getting approved, you need to get someone who has a good credit history that shows they have been able to stick to their loan agreements. In most cases, this person will need to be a family member or a close loved one who is willing to do this for you. Should you go this route and find someone willing (because some people will refuse due to the risks it comes with), you’ll need to ensure you stick to your car payments religiously to safeguard your credit score. 

Build your credit score 

This may seem like a lengthy process, but for some, it may be the only way for them to afford a car. Building your credit score from scratch may take time, but it’s not impossible. So, with that in mind, work on how you can improve your credit. For starters, you need to:

• Open a line of credit, e.g. credit card or store account that you can use to build your credit history. 
• Ensure you never miss any monthly payments. 
• Pay the agreed amount or more when making your repayments. 
• Pay your bills on time. 
• Keep track of your credit score so that you can dispute any incorrect information on your report. 

This approach may take a couple of months until you see results; however, once your credit score improves and you’re in good standing, you can get approved for a loan, thus making your life simpler. 

Consider a car dealership 

There are car dealerships where you can buy a car with no credit history. These are the dealerships that advertise that you don’t need a credit score to get car finance. You can look at their options, but it’s important to vet the dealership to confirm it is reputable and reliable. Here are a few tips on how to pick up if a dealership is the real deal: 

• Crazy bargains are a red flag when it comes to dealerships. While they may offer impressive prices, you have to keep in mind they’re running a business. So, anything that seems “too good to be true” usually is, and it’s best to steer clear.
• Every vehicle should have its own service book with a completed service history.
• Pushing for a quick sale is one of the easiest ways to pick up that you’re being scammed. Any process that requires a large amount of money must never be done forcefully. Instead, it should be a streamline, simple process that gives you confidence and allows you to ask questions without feeling rushed or pressured to sign. 

Apply for graduate finance 

Now, you may be wondering how you can get car finance with no credit history? Well, the answer is simple. Some lenders offer graduates car finance even if they have a non-existent credit score. This is because they understand that recent graduates are only entering the job market. With graduate finance, you can purchase any vehicle from their approved dealerships. They will assess your affordability, ensuring you repay an affordable monthly amount. To meet the car finance requirements, you need to;

• Be a recent graduate (graduated within the last three years).
• Be under the age of 31. 
• Earn at least R10 000 per month.
• Be permanently employed or have a letter of employment.

Final thoughts

Graduate finance may be the most effective and simple way to purchase a vehicle at this point in your life. It will also help you build your credit score and improve your chances of getting better interest rates and loan deals in the future should you need credit for either buying a house, another car or a business loan.