What is the difference between Joint Car Finance and Guarantor Car Finance?

Car Finance Joint or Guarantor?

If you’re struggling to get a car finance loan, you might consider a joint application or a guarantor car finance deal. Both of these finance options require another person to be involved.

They are unsurprisingly popular with:

  • Young applicants (with a limited credit history or income).
  • Partners (where one has a less-than-perfect credit score).

Naturally, this additional applicant will need a good credit score and a reliable source of income.

While Joint and Guarantor car loans might sound similar initially, there are significant differences in how these agreements work. Read on to find out what option might be best for you!

Before getting into an agreement

Signing up for any finance agreement is a serious commitment. Before considering entering into a joint application or guarantor car finance deal, you must make sure you can afford the monthly repayments.

Create a realistic budget, and make sure you can afford to make the monthly repayments for the car. On top of that, factor in all the additional costs: insurance, fuel, road tax, MOTs, service…the list goes on. If it’s going to be tight, consider a cheaper car.

Likewise, be realistic about your prospects. Are you on a temporary work contract or considering going back to studying? Remember, a car finance deal (usually) lasts for years!

Joint car finance

A joint car finance deal is precisely what it sounds like: instead of just having yourself on the application. You’ll have someone else. Typically, this is a parent or a responsible older person. The advantage of this is that their income and credit score will be counted, which can help boost your chances of a decent deal.
Naturally, this person has to be financially responsible and have a good credit rating and a reliable (and consistent) source of income.

Critical points of joint car finance

While a joint car finance deal can be perfect for many drivers, it’s not without its downsides:

  • You don’t own the car during the contract: With this finance deal, you don’t own the vehicle until you make the final payment. That means you can’t modify it or sell it (if you decide you want to swap cars).
  • You jointly own the car on final payment: At the end of the contract, you both own the vehicle. Duel ownership might lead to disagreements if one of you wants to sell it but the other doesn’t. Make sure you plan for this before you even sign the contract.
  • Both applicants are liable: If you have a fallout with your applicant, you’re still both responsible for the debt…even if you’ve paid your half!
  • Only one registered user: Only one applicant can be the registered user of the car. This person is responsible for all of the admin with the vehicle, like taxing it.

Guarantor car finance

A guarantor car finance deal is quite different from a joint purchase deal. Instead of two applicants signing up, you are technically the sole applicant.

The guarantor is legally obligated to pay the debt if you can’t. Having a guarantor means the lender is far more likely to give you a good deal, even if you have a poor or non-existent credit history.

We highly recommend picking a family member as a guarantor with whom you know you’re not going to fall out: like a parent, guardian, or older sibling. They must also have a good credit history and a reliable source of income.

Critical points of guarantor car finance

  • The lender owns the car: You don’t own the vehicle until the final repayment, meaning you can’t modify or sell it before.
  • The applicant is the registered user: This means that the borrower, not the guarantor, is solely responsible for admin tasks for the car: such as putting it in for an MOT, service, and taxing it. The guarantor has no rights to the vehicle: even if they end up paying for all of it!
  • This deal requires a lot of trusts: If you fail to make a payment, it will land on your guarantor, which can be extremely testing to relationships, so be careful who you choose as your guarantor.
  • Everyone’s credit history is at risk: Both you and your guarantor have their credit history on the line. If you fail to pay and the guarantor bails you out, they will still have their credit history negatively impacted!