Joint Application Car Finance

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Joint application car finance! Who is it for?

For many young drivers, getting a car is a feeling of independence – something that is yours and yours alone!

But for others, it’s a crucial tool shared, usually with a parent or a partner.

In those cases, it can make more sense to make a joint car finance application where you jointly purchase the vehicle.

This blog will run through how a joint car finance application works, so you can check if it’s right for you!

Can I apply for joint car finance?

Yep! Anyone over 18 can apply for joint finance: but that doesn’t necessarily mean you’ll be accepted.

From the finance providers’ point of view, two heads paying for the same car are better than one. If you’re the sole applicant for car finance, your financial profile will need to be strong.

However, by pairing up with someone, such as a parent, with a better credit score, you’ll increase your chance of being accepted for joint finance and a higher chance of a favourable interest rate.

Joint application car finance can be an excellent option for young drivers and students. You can use your parent/guardian’s good credit record to get a finance agreement on a reliable motor. Over time your financial score improves, and next time you can apply on your own.

Your co-signer’s ability to be reliable with a good credit rating is crucial. Suppose you’re signing with a partner who has a mountain of credit card debt that they’re behind on repaying. You will seriously affect your chances of a good car loan.

How do joint finance applications work?

How joint applications work varies from lender to lender, but you’ll first send over your personal details. In many cases, the finance company will get in touch for all the info they need about the additional applicant.

With joint car finance, the applicants are usually partners, parents or other family members, there’s no hard and fast rule. In theory, it could be anyone over 18 (depending on the lender’s criteria).

Not all lenders accept a joint application for car finance. Even if they do, the criteria could be significantly different from lender to lender.

For instance, it’s pretty standard for the finance provider to reject a joint application if both you and your co-signer live at different addresses. You’ll have to try a few lenders to find one that fits your circumstances.

Can I joint finance a car with my child?

Yes – you are assuming that the child in question is over 18! A minor can’t sign a finance agreement. The lender will likely require both of you to live at the same address.

Will both applicants require a financial history check?

So how is your credit score affected when you’re shopping around for joint car finance?

A lender will generally only do a soft search financial check on both joint applicants. A soft search means that it will not appear on either applicant’s credit profile.

Much of the decision is about your income. A significant advantage of a joint car finance application is someone on a low salary, such as a student, might reach the affordability requirements due to the other applicant’s good income.

Of course, if you get acceptance for a car joint finance agreement, the lender does a hard search on both you and your co signers’ credit files. You cant get car finance without a hard search.

If all goes well and the joint car finance application goes through, both you and your co-signer will be held equally responsible for the payment commitments – even if one earns more! That’s why it’s so important to have a good relationship with your co-signer.

Will a joint car finance application affect my credit score?

Yes, it will appear on your financial file. However, it can positively boost your score.

You’ll be financially responsible if you make your monthly payments on time. So crucial for the future when you look to apply for a personal loan or a mortgage.

Of course, the other side of that is that your credit score will take a considerable beating if you miss repayments.

Will a joint application car finance agreement help me get a vehicle if I have a bad credit score?

Yes, and this is one of the primary reasons people take out a joint application. Having a solid credit history can be very difficult if you are young.

When you’re young, it’s unlikely you’ll have had the time to get a bad credit rating, but you probably won’t have much at all! In the eyes of lenders, this is still bad.

Making a joint application with someone with a long and detailed positive credit history gives the lender reassurance that they will get their money back.

However, a word of caution is careful about making a joint application for car finance with someone who has a bad credit profile. Both applicants’ credit files are financially linked and could negatively affect you down the line – even if your credit history is good.

What if one of us can no longer afford the repayments?

Ahh, the nightmare scenario. If you are a joint applicant and unable to pay your share of the monthly payments in the future, your co-signer will be left to pick them up.

Legally speaking, you and the other applicant are held legally responsible for the loan repayments. The percentage doesn’t have to be 50/50. It’s up to you. However, at least one of you must make the repayments, or both will be held accountable.

If you get into financial difficulty and struggle making repayments due to loss of income or another credible reason, it’s always worth reaching out to your lender. Your finance provider wants you to pay the loan back, and they aren’t out to get you.

In many cases, they can offer a payment holiday, where you take a few months off from making your repayments and extend the length of the contract.

Joint liability explained

As touched on earlier, when you take out joint car finance, you’re not necessarily signing up for a 50/50 split.

Legally speaking, you must pay the entire debt if the other person can’t, and vice versa. The lender doesn’t care who the money comes from – as long as the repayments happen!

Whether you decide to split the loan 50/50 or, for example, can contribute less, if the application is with your parents, it’s ultimately a ‘gentleman’s agreement’ between the two applicants.

It’s not legally binding, and it’s up to you to make an arrangement that works for you and your co-signer. So only make a joint application with someone you have a stable and open relationship with and trust.

Lenders use many different terms to discuss financial responsibility. You need to be aware of ‘joint’ and ‘several’ liability. A legal obligation doesn’t make a difference in who is driving it more or whether you’re no longer in a relationship.

Joint debt means joint liability. Think hard on that before you sign on the dotted line! Is this someone you could potentially have a falling out with? That’s why it’s better to use a family member.

Is joint finance available on all types of car finance?

Yes! a joint car finance agreement is typically available on Hire Purchase car deals and Personal Contract Purchase (PCP). Car leasing

HP car finance

A Hire Purchase (HP) car finance deal is one of the most common ways to get a car. You have a repayment schedule to pay the car’s total cost over a specific time – usually three to five years. You’ll have an option to put down a deposit to reduce your monthly outgoings.

You don’t own the motor until you make the final repayment – but after that,! You can keep driving it until the wheels come off, or you can sell it. It’s your call.

While you can make a joint car finance application on a Hire Purchase, only one of you can be the car’s registered keeper despite you both owning the motor.

However, you will still both have legal ownership of the car, but the primary user is responsible for taking care of the car and doing things like an MOT and paying the road tax.

Be sure you and your co-signer are on the same page before taking out a Hire Purchase. Perhaps you want to pay it off, then sell and split the money. It’s up to you!

PCP car finance

A Personal Contract Purchase (PCP) car finance deal is more complex than a hire purchase deal.

You have the option of a deposit, and then you pay a monthly fee for the next three to five years.

Crucially, this monthly fee is smaller – because you don’t have to own the vehicle at the end of the term!

You could hand the car back or opt for the ‘balloon payment’ to own the motor outright. The latter is typically a few thousand, and many choose to hand the car back instead.

Typically, PCP take-up is by someone who likes to change their vehicle every few years. You own the motor outright if you opt for the balloon payment. You can only have one person as the car’s registered keeper.

Pros and cons of joint car finance

Pros

  • You can get a car finance deal on a newer and more reliable motor than if you applied alone.
  • If the co-applicant has a higher income and a decent credit profile, you can get accepted for car finance with a poor or non-existent credit rating.
  • You can split the costs for the motor.

Cons

  • Only one person can be the vehicle’s registered keeper at the end of a joint car finance agreement.
  • If one of the applicants misses a payment or loses their job, the other is responsible for paying it.
  • You are financially linked to each other, negatively affecting someone’s credit score if you have a poor credit score.

The guarantor route is often favoured, as it allows someone to have a bit of independence and financial responsibility.

Who is the owner of a jointly financed vehicle?

The car legally belongs to the lender until final repayment when the ownership passes to both borrowers – so if you sell the motor, you ought to both get a share of any profits.

Ultimately, there can only be one registered keeper of a motor if you eventually own it outright.

Joint application vs guarantor – which is better?

While they may seem somewhat similar in function, a joint application and guarantor loan is different.

A joint application is simply two people applying for a loan, and both are entirely responsible for making the repayments.

A guarantor loan is on one person, the borrower, assuming they make all the repayments. The guarantor’s task is a safety net, but they are legally responsible for the borrower’s debt if left unpaid.

Rates from 7.9% APR: the exact rate you will be offered will be based on your circumstances, subject to status.

Representative example: borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed), and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37.

We look to find the best rate from our panel of lenders and offer you the best deal you’re eligible for. We don’t charge a fee for our service, but we earn a commission. This does not influence the interest rate you’re offered in any way.

Autedia Limited is a credit broker and not a lender, authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 948436). You can check the authorisation on the FCA Financial Services Register.