A Guide To How
Car Finance Works

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What Is Car Finance?

In the simplest form, car finance is a credit agreement between you and a lender which enables drivers to purchase a new or used car. Car finance is a great option because unlike most other financial products your monthly repayments will be fixed. It certainly gives people with a tight income some serious options to consider.

How Do I Choose The Right Finance For Me?

The best starting point is to set out:

1. How much you can afford to borrow and, therefore, pay back every month
2. How much you want to borrow
3. How long do you want to keep the car
4. Find out what your credit history is
5. Do you have any savings that can be used as a deposit?
6. Are you likely to change your car within the next three years?
7. Are you buying your new car through a private sale or through a reputable UK dealership?

The answer to each of these points will determine the nature of your loan and the chances of your application being accepted.

What Documentation Do I Need?

Essentially, lenders are looking for proof that you are a good credit risk or, at least, you’ll be able to repay the approved loan amount. They will request particular pieces of documentation, they’ll access information held by 3rd parties and they’ll check any employment references you provide. Essentially, lenders are looking for proof that you are a good credit risk or, at least, you’ll be able to repay the approved loan amount. They will request particular pieces of documentation, they’ll access information held by 3rd parties and they’ll check any employment references you provide.

Below is a checklist to get you started:

1. Identification: You will need to provide your full name (and your previous name(s) if you have changed it), your date of birth, marital status, residential status (i.e. whether you are renting, living with parents or a homeowner) along with your full address history for, at least, the last 3 years. Most finance companies will ask you to prove your residence for up to 2 separate addresses. This can be in the form of a utility bill (where you are named on the bill), and/or bank statements (although some forms are not accepted so you should check with the finance company what they will and will not accept). These individual pieces of documentation usually need to be dated within the last three months. Otherwise, your application will be rejected.

2. Employment Details and Proof of Income: You will need to provide the name and address of your employers for at least the last 3 years or longer if you have changed jobs or have gaps in your employment history. You will also need to provide your job title and salary for the last 3 years along with proof of your income. This can either be done by your accountant or by supplying bank statements. If most of your income comes in the form of cash then you will need to show other documentation to support your income claims. This may be a tax return information. If you are self-employed that you will need to present your accounts to show your income.

3. Bank Details: You need to provide the bank details for the account that you will be using for your monthly repayments. You will need to confirm your account number, sort code and the address of your branch. The account should be in your name or jointly in your name.

4. Driver’s License: Most finance companies will automatically reject an application if you don’t have a driver’s licence. After all, it is illegal to take finance out for someone else. If you have lost your licence or it’s been sent back to the DVLA for penalties to be added then you will need to provide additional personal identification. This is usually a passport or a similar form of ID. The car dealer will be able to tell you what their finance company requires. The finance company will also contact the DVLA to confirm that you do actually have a driver’s licence.5. Vehicle information:  If you’re buying a new car, you will need the dealer sheet or buyer’s order, which includes the purchase price, vehicle identification number, year, make and model. If you’re buying a used car, get the above information from the seller, along with the car’s mileage, original title and disclosure of any liens on the car.

But What Happens If You’re Unable To Provide Details For The Last Three Months?

Believe I or not this is a common problem. Perhaps you have recently moved to the UK or perhaps you’ve recently entered employment. This is not a huge problem. The lender will just need to know as much information as you can tell them.  Some finance companies will also make oversea checks. This is so they can verify your previous employment and residential details. Young adults are often asked for a guarantor if they don’t have an extended employment or credit history.

Are the Loans Secured or Unsecured?

Many types of loan use the car itself as security against your making the agreed repayments when they fall due – if you default, the finance company may repossess the vehicle.

Some of our lenders, however, are content to arrange personal loans which are completely unsecured. Naturally, for these, you are likely to need a healthy credit status.

What’s The Process?

  1. Complete our simple online application form;
  2. If accepted, the loan amount you can borrow will be discussed with your car finance expert;
  3. Now for the exciting part – choose a car of your choice from any reputable dealership;
  4. Once you’ve found your perfect car, give us all the details and we’ll do the rest;
  5. You’ll receive finance paperwork to sign and return to us;
  6. You can collect your new car
Get your car finance

Apply to compare 100+ car loan offers from UK’s top lenders and we will find the best car finance deal to suit your budget.

Get your car finance today
1. Buy from any reputable dealership.
2. No deposit needed for your new car.
3. No fees. No obligation quote.

Set your car loan budget

Representative example – excellent credit Borrowing 7500 over 4 years with a representative APR of 6.9% and a deposit of £0, the amount payable would be £177 per month, with a total cost of credit of £1,035 and a total amount payable of £8,535.

I would like to borrow
I will repay it over
  • Best available rate:6.9%
  • Total repayment 8,535
  • Total cost of credit 1,035
48 monthly payments of 177
Get my personalised quote

Get in touch, we’re here to help

Monday to Friday (9am to 6pm) and Saturday to Sunday (9am to 5pm).
Email: carfinance@carfinanceplus.com
Telephone: 0330 043 0033

*Car loans are applicable to UK residents only. We do not take applications over the phone. Calls may be monitored or recorded.