Buying them their first car with a personal loan

Written by

Robert Walton

Robert Walton is a Senior Marketing Manager with many years of experience helping brands reach the right customers through clear, informative and straight-to-the-point comms. He's all about delivering top quality customer service and shouting about the great things we do here at Novuna. In his spare time, Robert dabbles with DIY and likes to write about his home improvement tips and tricks.

Friday 14th July 2023

Buying a new car for your son or daughter can be exciting – but what type of car is best for a new driver, and how can you fund such an important purchase?

In this guide, we’re sharing all you need to know about buying a new car for your child.

Top tips to help you choose a first car for your teen

1. Be practical

Your son or daughter might prioritise style over substance. Be the voice of reason and ensure the car you choose is safe and reliable. You don’t necessarily need to choose a brand-new car, but a car that is in excellent condition, has a full service history and a good safety rating will give you peace of mind.

Look out for safety features instead of gadgets and gizmos. An anti-lock braking system, electronic stability control, air bags and brake assist should be included in all relatively modern cars. But there’s additional technology such as hill hold, blind spot warnings, adaptive cruise control, lane keeping assist, parking sensors and pre-crash systems now available that could help them to stay safer when they get behind the wheel.

Research the cost of car insurance and tax on different vehicles before deciding on a certain make or model too. You don’t want to set your heart on a type of car that will end up costing you a fortune in extra bills.

2. Think small

Small cars can be mighty. They’re more manageable for new drivers and tend to be a bit cheaper too. The Ford Fiesta, Volkswagen Polo, SEAT Ibiza, Hyundai i10 and Vauxhall Corsa regularly appear in ‘top cars for new drivers’ lists for this reason.

Small, cheaper cars can be a good option for teens learning to drive, too. If you’re not keen on them getting behind the wheel of your own car while they’re learning, a small, older car could be a good option. It will help your child to find their feet while learning in a car that hasn’t cost you a fortune.

3. Set a budget

As with all things, it’s easy to go over budget once you start shopping. It’s so tempting to opt for a newer model or one with snazzy features like heated seats included. If you set a clear budget for your car-buying mission, you won’t be tempted to spend what you can’t afford.

It’s also a good idea to tell your son or daughter what your budget is in advance, if you’re shopping for one together. This helps to set expectations nice and early, so they won’t head straight to the top-of-the-range wheels if the option simply isn’t on the table.

4. Always test drive the vehicle

If you’re buying a car for your child, chances are they’ll be fairly new to driving and might still be building their confidence behind the wheel. It’s therefore recommended your child drives the car before you buy it, so they can make sure they’re comfortable with how it feels.

If you’re buying the car as a surprise, try to put yourself in the shoes of a new driver. Always take the car for a spin to see how it handles.

5. Conduct essential checks

If you are opting for a second-hand car, you must conduct essential car checks whether you’re buying from a private seller or a dealership. From tyres and electrics to bodywork and interiors, make sure everything’s as it should be so you don’t end up spotting issues when you’ve already driven away.

This is the first step in teaching your teen the basics of car maintenance, too. Why not take them along to the garage or let them conduct some of the checks themselves (with your guidance)?

6. Consider ongoing extra costs

The vehicle itself is just one of the expenses involved in buying a car. Before you commit to buying one, think about who’ll be responsible for the ongoing costs. For example, will your son or daughter be expected to pay for their insurance, fuel and maintenance?

Looking after a car is a great opportunity for teens to learn how to budget. They might have to look for a job to fund the running costs or learn to set aside a percentage of their earnings to pay for the car’s annual service or road tax. But make sure you have a plan of action in place before diving in and making a purchase to limit any arguments or misunderstandings later down the line. A car is a big responsibility, and you might need to help your teen along the way – beyond simply buying them the vehicle.

How to fund a new car for someone else

Your child may not be in a financial position to fund their own first car just yet. Perhaps they’re still waiting for their savings to grow, they’re under eighteen and aren’t legally able to sign a credit agreement, they have a thin credit file and therefore a poor credit score, or you want to treat them to the gift of a new car? As a parent, you may wish to step in and help them buy their first car and there are a few different ways you can do that.

Of course, the most obvious option is to buy the car outright. This is a suitable option if you have enough money in savings and would prefer to avoid paying any interest costs.

However, if you don’t quite have enough money saved up or you’d simply prefer to spread the cost, a car loan could be a good option.

Never use car finance to buy a car for someone else

Many people might be used to using car finance, such as Personal Contract Purchase (PCP) or Hire Purchase (HP), to fund a new vehicle. However, finance won’t be available if you’re buying a car on behalf of someone else. Lenders in the UK simply won’t allow you to finance a car that is going to be used by someone else – even if you’re transparent about it.

That’s because if credit risk and affordability checks have been conducted on you, and yet someone else is responsible for the car and the repayments, the lender will rightly be exposing themselves to much greater risk of the debt not being paid off.

In fact, getting car finance in your name and then gifting the vehicle to someone else is an illegal, fraudulent act.

How to use a loan to buy a car for your child

We’d only recommend taking out a loan to fund a car for your child if you intend to gift the vehicle. You’ll both know from the outset that you’re responsible for the repayments, helping you to manage your outgoings.

You shouldn’t take out a personal loan on behalf of your child if you have an expectation that they’ll pay you back. While it’s not technically illegal for you to ask your child to reimburse the loan repayments, it’s certainly not something we’d suggest. If your child fails to pay you back, you’ll still be responsible for the debt while they will still be the legal owner of the car. This can cause immense amounts of stress for all parties involved.

One of our customers, Elaine, used a car loan to give her daughter-in-law access to the vehicle she needed. Elaine explained: “Unfortunately, she couldn’t afford one herself and I wanted to help her. Novuna offered good rates, clear terms and conditions, simple applications and quick decisions.”

For more real life stories, take a look at why you should choose a Novuna car loan.