Car finance eligibility - Can I get car finance?

How to get a car on finance

Buying a car is one of the biggest purchases you'll make, second-only to purchasing a house, so it's important to get it right.

There are different ways to buy a car: buying it outright, leasing, or taking out car finance.

In this article, we’ll cover everything you need to know about car finance eligibility and how to get a car on finance.

What do you need to apply for car finance?

To apply for car finance, you will usually need to provide certain personal and financial details, as well as information about the car, including:

• Proof of identity
• Proof of address
• Proof of income
• Employment details
• Bank details
• Type of car
• Car price and deposit

There may also be certain criteria that apply when applying for car finance, for example, different lenders have different age criteria, but in most cases, if you are between the ages of 18 and 79, you can apply for finance.

Types of car finance

There are four main types of car finance:

• PCP (Personal Contract Purchase)
• PCH (Personal Contract Hire)
• HP (Hire Purchase)
• Personal Loan

The type of finance you choose will depend on your personal and financial circumstances and budget.

Read our in-depth guide on the different types of finance or visit your local Arnold Clark branch, where our friendly staff will be happy to help with any questions you have.

Things to consider before applying for car finance

You pay more than the cash price of the car

As with any loan, you usually end up paying more than the cash price due to the interest charge.

The rate of interest depends on many different factors, such as your credit score, the general economic climate and the lender's rates.

However, the good news is that the APR you agree to on the day you are accepted for finance is the APR you will pay for the duration of your finance term. There's no need to worry about rising interest rates, as yours will remain constant.

You don't always own the vehicle

While you're paying off your finance, the car usually still belongs to your finance provider (unless you have taken out a Personal Loan, in which case you own the car from day one).

Depending on which type of finance you have taken out, you may own the car at the end of your agreement.

• With PCP, you can pay a balloon payment to keep the car.
• With HP, you own the car by paying the final Option to Purchase fee, which can be as little as £1. (Assuming you have stuck to your agreement and not broken any of the terms set out at the start.)
• With PCH, you can never own the vehicle.

Car finance terms and conditions

All agreements (aside from Personal Loans) have certain terms and conditions which must be complied with for the duration of the agreement. Below are some examples:

• Lenders may require you to have the car serviced in accordance with the manufacturer's recommendations.
• Lenders may restrict you from transferring ownership of a car.
• Lenders may have different criteria for certain people i.e., if you're a taxi driver, for example, PCP and HP providers may be reluctant to offer you a deal due to the high mileage you're likely to accrue and the difficulty in forecasting the vehicle value at the end of the agreement. In this case, your best option may be to use a Personal Loan.
• PCP and PCH lenders tend to have mileage restrictions. These will be agreed at the start of your term. If you exceed the agreed mileage, you may have to pay additional charges when your agreement ends.
• Lenders may have restrictions on travelling outside the UK. Therefore, if you wish to drive the car outside the UK, you may need approval from the finance company.

Please note that full terms and conditions apply for any particular finance agreement.

This article is designed to provide an overview of some of the common questions relating to car finance. However, it is not in any way exhaustive.

Your personal and financial circumstances will play an important part in any decision to apply for car finance, and you should seek independent advice if you are unsure what this may mean for your credit score and ability to afford any loan repayments.

Will I get accepted for car finance?

Getting accepted for car finance depends on a number of different factors which are directly related to your personal and financial circumstances.

Therefore, the application process is different for everyone, but at Arnold Clark, we’re here to make the process as stress and hassle-free as possible.

Do car finance companies check employment status?

You may be eligible to apply for car finance if you're not working, but as you will be required to show proof of annual income, you may be less likely to be accepted than someone in full-time employment.

You may also be eligible if you are retired or self-employed. In these cases, proof of income will be required.

Do you need a driving licence to get car finance?

No, you do not. You will need a full licence if you intend to drive the car on your own, however you do not need one to apply for car finance.

You will, however, need to provide some form of identification like a provisional driving licence or passport.

Can I apply for car finance even though I am not from the UK?

Individuals of any nationality can apply for car finance or a car loan in the UK if they have a credit history in the UK.

However, eligibility depends on the lender and your individual circumstances.

Can I get car finance with poor credit?

Your credit rating contains information about your credit history and a relevant score. If one finance company declines your application, this does not necessarily mean that you won't be able to get finance elsewhere.

The better your credit rating is, the more likely you are to be accepted by a greater number of finance companies.

Certain lenders specialise in lending to borrowers with a less than perfect credit history.

There may, therefore, be some finance companies that would be willing to accept your application, but you may find that you end up paying a higher interest rate with a specialist lender and you may also need a car finance guarantor.

At Arnold Clark, we have a panel of over 20 lenders, meaning you have lots of options when applying for car finance with us.

What can I do to improve my chances of being accepted for car finance?

When applying for any finance or loan, it is advisable to ensure all of your personal details are up-to-date, accurate and that you are registered on the electoral roll.

Do I need to be working to be eligible for car finance?

You may be eligible to apply for car finance if you're not working, but as you will be required to show proof of annual income, you may be less likely to be accepted than someone in full-time employment.

You may be eligible if you are retired or self-employed. In these cases, proof of income may be required.

What is a car finance guarantor?

A guarantor loan is a type of unsecured loan that requires a third person who is not financially linked to you, known as a guarantor, to sign the contract agreement.

You might need a guarantor if you're young and have a limited credit history, or a lender may ask for one based on your credit history.

The loan would work in the same way as any other car loan, but at the point of signing the documents you would need a guarantor to co-sign them.

By signing the agreement, the guarantor is agreeing to pay back the loan should you default on repayments.

If my car finance application is successful, how much can I afford?

This is your own decision and nobody should influence this decision.

You need to assess your finances, expenditure and budget to make sure you can afford the monthly repayments, insurance, fuel and maintenance of a car on top of everything else.

The finance company will also assess how much they believe you can afford to repay when deciding on how much to lend.

Once you have decided what you can afford, you can check which cars are within your budget. Add your budget to our deal builder tool on the car finance page to see your options.

Be realistic about what kind of car you can afford. Consider your monthly outgoings and factor in the running costs associated with your chosen car, too.

Additionally. if your personal or financial circumstances change partway through your agreement term, you should contact the finance company.