A wise guide to…

Bad Credit Car Finance

Looking to buy a car but worried about a poor credit history? You have options. Choose Wisely works with a diverse panel of lenders to help you find the best solution to finance your new car.

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Representative 49.7% APR. Representative Example: Borrowing £1,200 at an interest rate of 0.34% per day for up to 75 days (124% per annum, variable) and a Representative rate of 49.7% APR (variable).
Choose Wisely is a trading style of Choose Wisely Limited and is a free to use price comparison website. Choose Wisely Limited is authorised and regulated by the Financial Conduct Authority as a credit broker not a lender, firm reference number 730574 and is registered with the Information Commissioner’s Office number Z3106681.

Table of contents

Written by Mark Grimley
Read time: ~5 mins
Published: 16th November 2020 Updated: 19th November 2020

What is a bad credit car finance deal

A bad credit car finance deal is an offer of car finance to an applicant with bad creditwho isunable to borrow from mainstream and highstreet providers. There are three main types of car finance, hire purchase (hp), personal contract purchase and personal loans. There are also other options such as leasing and subscription where you effectively “borrow” the car.

What if i don’t have a deposit?

Don’t panic. Even without a deposit there are car finance options available. Be sure to compare your options as what’s available will be dependent on your personal circumstances.

f you haven’t got a deposit an unsecured personal loan could be an option to consider. Use the Choose Wisely loan search to find suitable options to compare. If approved you could have the funds to buy your car outright.

What details will I need to provide when applying for car finance?

You will have to have to provide enough detail to illustrate that you can afford the type of finance you are applying for. This will include detail on your:

  1. Personal identity

  2. Residential status

  3. Income and outgoings

  4. Employment status

  5. Credit History

Can I get car finance with no credit history?

If you have just moved to the country, never used credit, or have very limited credit history (known as having a thin file) getting car finance can be a bit trickier, but you do have options.

If you do have a thin file it’s all about preparation and research before making a formal application. Start by doing all you can to improve your credit file and then when you’re ready, compare your options. Completing a loan search with Choose Wisely is a good start and will provide you with options to compare that have accepted your application in principle.

I have bad credit what are my car finance options?

We work with a diverse panel of lenders and car finance brokers to try to find the right solution for you whatever your circumstances or credit history. This could be a personal loan, hire contract, personal contract purchase or even a car subscription.

If you do have bad credit and are considering applying for a personal loan then securing the loan against an asset such as your home may open up access to cheaper rates. Just beware that you’re home will be at risk if you miss repayments. Alternatively you could ask a friend or family member to act as your guarantor, but again make sure you talk things through with your guarantor as they will have to cover your repayments if you can't.

Is PCP a good option if I have bad credit?

PCP can be an option if you have bad credit as the finance will be secured against the car, reducing the risk for lenders. Due to the fact that you're not financing the whole value of the car a PCP deal can also offer lower monthly payments, which can be more manageable. As always compare your options before applying.

Can I use a guarantor to help me get car finance?

If you have bad credit a guarantor loan is an option. Here are some points to consider around guarantor loans::

  1. You will need a friend or family member to act as your guarantor

  2. You’re guarantor will have to cover your repayments if you can't

  3. Representative APR typically between 30% - 50%

  4. Loan amounts of £1000 to £20,000

Why does my credit score impact my chances of getting a car on finance?

Your credit score enables lenders to get an understanding of how you’ve managed credit in the past. If you have a low score and a history of mis-managing credit lending to you comes with greater risk. Some lenders may choose not to lend - others charge higher rates to try and cover any losses.

How can I improve my credit to get a better car finance deal?

There are a number of things you can do to try and improve your credit score. But here are some quick wins:

  • Sign up on the electoral role
  • Check for mistakes on your credit file
  • Ensure bills are paid on time
  • Utlise a credit score improving product eg. loqbox, bits or a credit builder card

How can I check my credit score?

There are a number of services that exist to help manage your credit score. Some are free, some charge a monthly fee. Clearscore.com is a reputable, free option.

Does car finance impact my credit score?

Yes - when you submit a full application with a finance provider they will check your credit report to ensure lending to you is a safe, responsible and a viable thing to do. This will mark your credit file. If you’re approved for car finance then how you manage your repayments throughout the duration of your agreement will be reflected in your credit file.

Bad credit car finance FAQs

What is a conditional sale agreement?

A conditional sale agreement is a traditional way of buying a car on finance. Much like a personal loan if approved you will be offered a straightforward agreement that consists of equal monthly payments. Some agreements may require a deposit and some may include the condition that the car doesn’t belong to you until you’ve made the final installment. Make sure you read the small print.

Am I guaranteed to get accepted for car finance?

No. The decision is up to the provider you apply with and will be subject to a number of credit and affordability checks.

How can Choose Wisely help me get car finance if I have bad credit?

Choose Wisely works with the UK’s top lenders and car finance specialists. If you click “Get Accepted” and complete the application form we will present your application to a panel of lenders, and then show you your options to compare.

Written by
Mark Grimley
Head of Partnerships & Take Control Author at Choose Wisely

Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.

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Important Information.

All of the information in this guide is correct at the time of writing.

Rates shown are quotes based on your personal circumstances, are subject to status and are available to those aged 18 and over. Rates available range from a minimum of 3.9%APR to a maximum of 1575%APR Representative and loan repayment periods range from 3 to 60 months.

[*][†] Once accepted, your loan can be transferred to you in as little as 15 minutes. The time that it takes for the loan to show in your bank account will depend on your lender and your bank.

If you need financial advice you can visit stepchange, speak to citizens advice, call the national debtline or speak to moneyadviceservice.org.uk.

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
Your score can be accessed for free via any of the main credit reference agencies such as Credit Karma, Clearscore or Experian.