Here at Car Finance Plus, we believe that people should have the option to buy a car at any stage of their life. Providing they are of driving age, the seniority of an individual shouldn’t be a factor that dictates whether a person is able to purchase a car. We’re often asked whether it’s possible for retirees to secure car finance and, in short, the answer is yes. We do provide car finance for retired people. That being said, there are a few extra considerations that must be taken into account by virtue of being retired, such as the lack of a full-time job. In this article, we’ll explain the difficulties that retirees may face when applying for a car loan, and how they can be overcome.
The biggest reason that people think retirees may struggle to secure car loans is that they do not have a job (almost by definition of being retired). All credible finance providers will ask for recent employment history as a means of verifying both income and identity. Since retirees who have been out of work for some time are unable to provide this information, they assume they’ll find it difficult to secure alone.
This simply isn’t the case. It’s a common misconception that employment is a critical factor used by lenders when considering credit applications – net income is. Most retirees will have some form of pension, if not multiple pensions. As long as their net income is high enough to meet repayments, there’s no reason why not having a job will hinder a person’s chances of securing car finance while retired. After all, the lender is most concerned with the individual’s ability to keep up repayments.
Retirees may have income from a number of sources, such as savings, pensions, part-time work, or investments made over the years. The net income from all of these sources must be declared when applying for finance in order for lenders to accurately assess your credit risk.
Another potential difficulty retirees face when applying for car loans is if they have a bad credit score. While we at Car Finance Plus specialise in helping people with bad credit get car finance, having a good credit score makes it easier, especially when retired. The reason is that credit scores are a representation of a lifetime of credit and money management. For younger people, improving their credit score is potentially easier as there is less history to ‘correct’. It’s more difficult to reverse a lifetime of bad credit history than it is to reverse a few years of bad credit history.
That being said, retirees can still improve their credit score by following the same steps as everyone else. For instance, keep track of any and all outstanding debts – knowing your financial situation is an important part of improving it. Additionally, ensuring you have a full driver’s licence and are on the electoral roll will very quickly improve your credit score and make you a more attractive borrower.
On the other hand, retirees can use their seniority as an advantage. A retired person with a good credit score has far more evidence of good money management than a more junior person does. This works in their favour and can make a credit application a lot smoother, and they may even be offered lower interest rates as a result.
Another significant factor when assessing credit applications is recent address history, where the fewer addresses, the better. Retirees will often have lived in their current domicile for many years, and therefore have an advantage over a younger person who moves around frequently. Fewer recent addresses imply stability in a person’s life, and stability is something lenders certainly look for when deciding to whom they will lend.
In summation, retirees can not only secure car finance, but they may find it easier than those who are younger and of working age. Be sure to heed our advice and present yourself as the lowest credit risk possible in order to better your chances. For more information on the process of securing car finance, check out our How It Works page. If you have any further queries, please get in touch with our team at 0333 050 3440.View more from The Car Finance Hub