Car Finance FAQs

Your car finance eligibility will depend on the lender that you apply with. Each lender has different eligibility criteria that they consider.

However, you must be over 18 years old and have been a UK resident for at least three years to qualify for a loan.

Lenders need documents/paperwork when you apply for car finance to verify you are who you say you are, protect you from identity theft, and ensure they don’t borrow more than you can realistically afford.

Applying for car finance can be a reasonably stress-free experience. However, as you would expect, the lender must carry out specific checks to verify and protect your identity and establish you can afford repayments on the amount you want to borrow.

To be approved for car finance, most lenders will require you to have at least three years’ address history in the UK. You can provide proof of your address by supplying copies of your recent utility bills, your Council Tax statement, or your Tenancy Agreement if you rent. These documents will usually need to include your full name and address.

Being unemployed and wanting to buy a car on finance can be challenging without a reliable income. However, depending on your circumstances, getting a car loan when unemployed is doable, especially for those receiving a pension or benefits and a good credit score or an upfront deposit makes securing a car finance deal easier.

Choosing between a new or used car? Check out our quick guide to weigh up the pros and cons of both options to find the right choice for you.

While your nationality doesn’t matter when applying for car finance, if you’ve been a UK resident for less than three years, you might find it more difficult to secure a loan. It’s all about risk; if you’ve not been in the country for long and started to put down roots, lenders may worry that you might not stay in the UK for the duration of your loan agreement.

You’ll have to wait until 18 to get a car loan. However, there is no upper age limit for taking out car finance.

Millions of drivers of every age want to finance a car, and there are plenty of options for young people, retirees and pensioners who might want to finance a vehicle, even those with bad credit.

Car depreciation is the difference between the amount your vehicle is worth when you buy it and its value now. All cars (except classics) lose value over time with brand-new models going down in price by up to 50% over their first three years of life. The speed at which a car loses value is known as its depreciation rate.

With certain types of loan like hire purchase (HP) or personal contract purchase (PCP), you can’t sell your car with outstanding finance. That’s because the lender will be the car’s legal owner until all your payments are made (including the balloon payment in a PCP deal). But that doesn’t mean you can’t end your agreement early if your circumstances change – you just need to settle your finance first.

It happens pretty often. You take out a car finance agreement for three or four years, and guess what! Circumstances change what was a good idea at the time is no longer. If you decide to terminate your current finance agreement early – you’ll need to apply for a car finance settlement figure. You can request the settlement figure from your finance provider.

Only when the full amount outstanding is paid in full will the account appear Satisfied on the credit file.

Part exchange is when you trade in your current car to help lower the cost of your next set of wheels. There are many reasons why you might choose part exchange; it can be used in place of a deposit, reduce the amount you need to borrow on your car finance, and means you don’t have to worry about the hassle of selling a car privately.

A car finance affordability check is pretty simple – it’s a way for the lender to see if you can afford to pay back the loan and not struggle with your repayments.

Lenders consider your monthly income and regular outgoings to arrive at “disposable income.” Also, it helps to establish the amount you can afford to borrow.

If you have a job that pays minimum wage, work part-time, or have a low income for any other reason, you can get car finance. It isn’t always easy to secure a deal with a lower income and it might restrict the amount you can borrow, but it’s not the only factor that affects your eligibility.

Ending your car finance by Voluntary Termination (VT) is your legal right under the Consumer Credit Act. You can terminate a new or used car finance contract early and return the vehicle. You must have paid half of the Total Amount Payable to end the VT.

In short, your credit score is measured based on any financial history that’s available about you. Typically, lines of credit you’ve taken (for example, 0% finance on a laptop) or a mobile phone contract. Or more important things like existing car finance or a mortgage. Credit history is usually over the previous six years: so if you’ve got a less-than-stellar one, you’re stuck for a while.

An outstanding car finance agreement is when the borrower has not yet paid off the loan amount. Before selling or trading the car, you must pay the remaining balance.

Car finance lenders need to know your income to double-check that you can comfortably afford the loan you’re being offered. You can provide proof of income whether you’re employed or self-employed by providing recent payslips, bank statements, or copies of your company accounts if you own a limited company.

Applying for car finance is straightforward when you have a  full driving licence, as it also acts as your form of photo identity. You’ll need to upload a picture of your licence when requested.