What Do Car Finance Lenders Look For When You Apply For Finance?

💳 Credit History And Score

Your credit history shows lenders how reliably you’ve managed borrowing in the past and helps determine your approval and interest rate.

Your credit score matters when applying for car finance. Car Finance lenders use it to decide if they'll give you a loan and what the terms will be. Your credit score shows how good you are at managing your money. It's based on your borrowing history, whether you’ve paid your bills on time, and how long you’ve used credit. A good credit score means you'll probably get a lower interest rate, which can save you a lot of money. However, a bad credit score could mean a higher interest rate, which will cost you more in the long run.

We’d always recommend checking your credit score before applying for credit; that way, you can know what type of finance offers to expect.

Click here to learn more about your credit score impacts your car finance application.

💼 Income And Affordability

Lenders assess your income and expenses to make sure you can comfortably afford the monthly repayments.

Lenders will look at recent payslips and bank statements to assess your monthly income, regular expenses, and existing financial commitments to make sure you can comfortably afford repayments. Lenders will check for living costs, rent/mortgage costs and any additional bills. These financial documents will be used to calculate your debt to income ratio, which looks at how much of your monthly earnings goes towards repayments. If this is high, it signals a poorer financial position to lenders. Lenders are required to make sure you can afford repayments without financial difficulty before approving your application.

🧾 Employment Status And Stability

A stable job and consistent income give lenders confidence that you can keep up with repayments.

Lenders will look at your employment history, namely how often you have changed jobs and how long you’ve spent in each job. To a lender, a stable job is a good sign of income stability. If you are self-employed, lenders will look for additional proofs of income to confirm that you can meet repayments.

Read our guide: Self-Employed Car Finance for more information.

🏠 Address History And Stability

Your address history helps lenders verify your identity and assess your financial stability over time.

Lenders will look for at least 3 years of address history when you apply for car finance. Having an address on file is a good indication as to your current financial obligations, and when combined with presence on the electoral roll register, offers significant insight to potential lenders.

🪪 Identity And Fraud Checks

Lenders use identity checks to confirm who you are and reduce the risk of fraud.

Identity checks help lenders avoid customer fraud. In order to verify identity, lenders request:

• Passport / driving licence.
• Proof of address.

Failure to provide these documents will almost guarantee a failed car finance application.

🚗 Vehicle And Loan Details

The car’s age, mileage, and value help lenders assess risk, especially as the vehicle secures the finance.

Car finance lenders also look at the car mileage and age in order to assess depreciation risk and how easily the car could be sold if repayments are not maintained. The car’s value will be used to calculate the loan amount. Because car finance is usually secured against the vehicle, lenders also consider how easily the car could be sold if repayments are not maintained.

💸Deposit And Loan-to-Value

A larger deposit lowers the amount you borrow and can improve your chances of approval.

A larger deposit reduces the amount you need to borrow, lowering risk for lenders. They may also assess the loan-to-value ratio, which compares the loan amount to the car’s value. Lower ratios are generally seen as safer.

📃 What Documents Do You Need For Car Finance?

You’ll need documents that prove your identity, address, and income to support your application.

You need documents that prove your identity, address and income, as well as credit information.

Broken down by requirement, here are the documents you usually need.

Proof Of Identity

• Passport
• Driving Licence
• Government-Issued Identification

Proof Of Address (Usually Dated Within The Last Three Months)

• Recent Utility Bill
• Bank Statement
• Council Tax Bill

Proof Of Income

• Most Recent Payslip
• Letter Confirming Employment
• Further Affordability Proofs If Self-Employed

Read Our Guide For More Information: What Documents Do I Need For Car Finance?

Before You Apply For Car Finance

• Check your credit file
• Avoid multiple applications
• Make sure your details match
• Register on electoral roll

Using a soft search or eligibility checker can help you understand your chances of approval without affecting your credit score.

Can You Get Car Finance With Bad Credit?

Yes, you can get car finance with bad credit. Marsh Finance provide car finance to customers of varying scores, with an instant decision that doesn't impact your credit score. 

Take the first step to a new car today.