What Checks Are Done for Car Finance?

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By Chloe Dickenson
Updated on Thursday 17 August 2023

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If you’re looking to get a car on finance, you first need to go through the car finance checks that are required. It can be a relatively easy process, but there are a few checks that you’ll have to go through first in order to be accepted for car finance.

Check your credit score to get an idea of your eligibility for finance now:

What do I need to get car finance?

Below, you can find just some of the car finance checks that may be carried out on you before you’re accepted.

Your driver’s licence

One of the first things that a car finance company may check is whether you have a valid driving licence or not.

If you’re looking to obtain a car on finance, it’s obvious that you should have a valid driver’s licence and even if you provide the validity of your license yourself, the company may still decide to contact the DVLA to double check it.

Proof of identity

You will also be required to provide proof of your identity. Depending on the car finance company, you may need to submit either your driver’s licence or passport as proof, or perhaps even both.

Address details

Details of your current address and potentially even details of some of your previous addresses may be required when carrying out a car finance check.

Companies do this so that they know how and where to contact you in the event that you fail to make your repayment.

Proof of your income and employment

You will also need to provide evidence of your income and potentially even your employment status so that they can be sure that you can afford to pay back the money as part of your car finance repayments.

You will likely have to provide evidence of your most recent bank statements, and possibly even a couple of payslips from your place of employment so that the company can check whether you’re eligible to pay back the money you borrow to finance your car.

Your credit score

They will also take a look at your credit score and report to see if you have a good or bad history of repaying any loans you may have taken out in the past.

The car finance company may also look at factors such as your age, any missed payments in your credit history, any previous applications you’ve made, plus other things.

Learn more: Creditworthiness Explained - How Lenders Decide Whether or Not to Borrow

How do I finance a car in the UK?

There are several car finance options that you can take advantage of, including personal contract purchase, personal contract hire, hire purchase and a personal car loan.

Personal contract purchase

With this type of car finance agreement, you will have to put a deposit of at least 10% of the car’s value down upfront and then you’ll have to make monthly repayments following this, usually over the course of three to five years, when you’ll then be given three options: to buy the car, exchange it for another or walk away.

Personal contract hire

This is essentially just like renting a car or leasing; you’ll pay a monthly amount and you’ll be able to use the car for the duration of the pre-agreed term.

Hire purchase

Hire purchase works by paying a deposit upfront for the car, then monthly repayment instalments plus interest over the period of one to five years.

Personal car loan

These types of loans can last from one to seven years and it will involve you borrowing a fixed amount of money and then repaying it each month with interest on top. They can be secured or unsecured loans - for example, if you get a loan that is secured against your home, you risk losing your home if you're ever unable to make the repayments. For this reason, it is usually advised that an unsecured loan is a safer option, but usually with car loans and mortgage loans, they are secured so that the insurer can get the money back if you fail to repay it.

Each one will be suited to different people depending on their needs, financial situations and what exactly they’re looking for. It's always best to speak to a financial advisor if you are unsure

You might like: Can I Get a Mortgage With Bad Credit?

Do I need a credit check for car finance?

While it is possible to be accepted for car finance without having had a credit check carried out on you first, most car finance companies will likely do a credit check to see if they think you’ll be suitable to pay back the money you borrow for your car.

Carrying out a credit check will give the company a better understanding of your financial position and credit history.

How long do credit checks take?

Credit checks differ in how long they take depending on many different factors, but you can usually expect them to be done within 2 to 10 days.

If you carry out a credit check on yourself, it could take as little as one minute online, depending on which credit check agency you do your check with.

What is a good APR for car finance UK?

A good APR for car finance in the UK differs enormously based on numerous factors, including your credit score.

However, according to a study conducted by Experian in 2019, the average APR for someone looking to borrow money who has a good credit score was 4.96% for a new car purchase, and 6.36% for a used car purchase.

Is it a bad idea to get a car on finance?

The answer to this question is incredibly personal and can only really be answered by you.

Generally speaking, buying a car outright isn’t always considered to be the best option as cars depreciate quickly and lose their value as soon as you drive it away, so it’s thought that you’ll end up losing a lot of money as you won't be able to sell it at the price you bought it.

However, if you’re not in the financial position to purchase a car upfront, then getting one on finance may make more financial sense to you as you can spread the cost out, providing that you can pay it back.

It can be a good idea to look at other alternatives to car finance as well when getting a car so that you’re aware of all your financial options.

Read more: Car Finance FAQs

Best car finance deals

Once you’re approved for car finance and you’ve gone through all the necessary car finance credit checks, you’ll then need to think about how to find the best car finance deals.

There are several things you’ll need to think about in order to find the right car finance deal for you, including your budget, your ideal monthly repayment limit and your credit score.

Check yours now by tapping the button below, or check out our related guide for further advice and information.

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