Car Finance FAQs

Most lenders won’t let you finance a car if someone else is going to be the registered keeper. That’s because car loans are tailored to an individual and based on their personal financial circumstances. If you try to take out a loan for someone else and don’t tell the lender, you could be guilty of fronting, which is a type of fraud.

It’s not usually possible to buy a car on finance for someone else. In fact, most lenders will ask that the person who signs on the dotted line is also your new wheels registered keeper and main driver. Every car finance agreement is tailored to an individual and suited to your personal circumstances.

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.

When you apply for car finance, the lender will ask you to supply documentation to verify who you are, where you live, and how much you earn. Paperwork needed can include bank statements, payslips, utility bills, and a copy of your passport or driving licence. They use this information to protect you from potential identity theft and confirm that the loan they’re offering is right for you.

When you apply for car finance, lenders will carry out several checks to assess your eligibility as a borrower. They need to check your identity, your credit score, and your affordability. These checks are in place to protect you and the lender and make sure you don’t end up with a car finance agreement that isn’t right for you.

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.

While it can be possible to get car finance if you’re unemployed, finding a loan can be more challenging if you don’t have a reliable income. It all depends on your circumstances, you may be able to get car finance if you have a good credit score and receive benefits, are a full-time student, have a part-time job, or work a side hustle.

There are pros and cons of buying both new and used cars. The best choice for you will depend on your personal priorities, budget, timeline, and what you need from your new set of wheels. While new cars can be more expensive, they can also be safer if you’re new to the road but used cars can be more affordable for younger drivers.

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.

Legally, you can’t sign a car finance agreement until you’re 18-years-old. Some lenders also have eligibility requirements that mean they won’t offer loans to people aged under 21-years-old. That doesn’t mean you’ll automatically qualify for a loan on your 18^th birthday as other factors will be considered including your income and credit score.

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.

If you want to bring your car finance agreement to an end early, you’ll usually need to pay the settlement figure. This is usually the amount left to pay on the loan, minus any future interest that you won’t need to pay. Keep in mind that early repayment charges might apply, but you can request the settlement figure from your lender at any time.

When looking at the different accounts listed on your credit report, it’s important to know the difference in meaning between a settled and satisfied account. While both terms mean the account has been closed and the full amount paid, a settled account is one that has been closed as the full amount owed has been paid. In contrast, a satisfied account is one that has gone into default due to missed payments but has since been repaid in full.

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 helps lenders understand if you can afford the car loan you’re applying for and will be able to make the monthly payments without going into financial difficultly. During the check, lenders will look at your disposable income, which is the amount you have left over from your pay once all your essential bills are paid.

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.

Under Section 99 of the Consumer Credit Act 1974, you have the legal right to voluntary termination. This is when you end your car finance agreement early and hand the car back to the lender. You’ll need to pay 50% of the total amount payable (including the balloon payment in a PCP). If you’ve already made payments but not yet reached this point, you’ll need to pay the difference.

The great thing about credit scores is that they’re never fixed, and you can take proactive steps to improve them over time. It’s not an exact science, but you might be able to boost your score if you register on the electoral roll, make all your debt payments on time, don’t max out your credit cards, and keep the number of hard searches on your credit report low.

You can’t simply change a car with outstanding finance, you’ll need to settle the loan first. That’s because, with an HP or PCP deal, the lender will be the car’s legal owner until you’ve made all your loan repayments. It’s also against the law to knowingly buy a car with outstanding finance remaining.