Car refinance Car finance eligibility & requirements (UK)

Your essential guide to UK car finance eligibility

Setting the scene

Navigating car finance in the UK is simpler when you know what lenders look for. From age and residency to income and credit checks, this guide explains the essentials so you can apply with confidence and avoid surprises.

Who should read this

If you are a UK resident planning to finance your next car, whether you are employed, self-employed, an apprentice, or rebuilding your credit, this article clarifies lender expectations and how to strengthen your application.

The language of car finance, decoded

Understanding a few core terms will help you compare offers clearly.

• APR - The annual cost of borrowing, including interest and standard fees. Lower is cheaper overall.
• Deposit - Upfront contribution that reduces the amount you borrow. A larger deposit can lower monthly payments.
• Term - The length of the agreement, usually 24 to 60 months. Longer terms lower monthly payments but increase total interest paid.
• PCP - Personal Contract Purchase. You pay monthly for depreciation, then choose to return, part-exchange, or pay a balloon to own the car.
• HP - Hire Purchase. You repay the full vehicle price over the term. Ownership transfers after the final payment and any option fee.
• Balloon payment - The optional lump sum at the end of PCP to take ownership.
• Soft credit check - An eligibility search that does not affect your credit score.
• Hard credit check - A full search recorded on your file that can marginally affect your score.
• Affordability check - Lenders review your income and outgoings to confirm you can manage repayments.

Clarity here prevents costly misunderstandings later.

Choosing how to fund your car

Different products suit different budgets and ownership goals. Compare the core features below.

Key points

• PCP works if you value low monthly payments and flexibility at the end.
• HP suits buyers who want ownership with predictable repayments.
• A personal loan can be competitive if your credit is strong.
• Leasing is not finance to own - think long-term rental with mileage caps.

What it really costs - and why it matters

Total cost is shaped by APR, term length, deposit, and fees. Lower monthly payments can be attractive but may increase overall interest if you extend the term. Lenders also price for risk - applicants with limited or poor credit may face higher APRs or need larger deposits.

• Risk factors that raise cost: thin credit history, recent missed payments, high credit utilisation, unstable income, or short employment history.
• Ways to reduce cost: increase your deposit, choose a shorter term, improve your credit profile, and compare multiple offers using soft checks where available.

Remember budgeting beyond the finance payment:

• Insurance, road tax, servicing, tyres, and fuel or charging costs all add up.
• Exceeding mileage on PCP or leasing incurs per-mile charges.
• Early termination can be expensive unless voluntary termination rights apply under the Consumer Credit Act criteria.

A slightly higher deposit today can reduce the APR and total paid over the term.

Can you apply - the core UK criteria

Lenders follow UK rules and responsible lending standards. Expect these baseline requirements across Great Britain:

• Age: Minimum 18 to enter a credit agreement. Some lenders set 21, especially for limited credit histories.
• Residency: UK resident with 3 years of address history. Proof may include utility bills, council tax, or bank statements.
• Driving licence: Usually a full UK licence. Some lenders accept provisional licences with tighter checks and limited options.
• Income and employment: Regular, provable income via payslips, bank statements, or tax returns. Many lenders look for at least 12 months of employment history. Apprentices and self-employed applicants can be considered.
• Income thresholds: Some set minimums. Example: around £1,000 to £1,500 per month is common. One lender model: £10,500+ annual income for loans up to £19,999, rising to £20,000+ for £20,000 to £25,000.
• Bank account: A UK current account is required for monthly direct debit payments.
• Credit checks: Hard checks are mandatory before approval. A higher score improves terms, but specialist lenders and joint applications can help if credit is poor.
• Affordability and status checks: Lenders review income, outgoings, and existing commitments. Some require your current account to be open for at least 3 months.

The goal of these checks is protection - preventing unaffordable borrowing.

From quote to keys - the typical journey

1. Check eligibility with a soft search to protect your score.
2. Set a realistic budget including insurance and running costs.
3. Choose a product - PCP, HP, personal loan, or leasing.
4. Gather documents - ID, licence, proof of address, income.
5. Compare offers from multiple lenders or brokers.
6. Submit your application and consent to a hard credit check.
7. Review and sign the agreement after reading terms carefully.
8. Arrange collection or delivery and set up direct debit.

The trade-offs in plain sight

Pros

• Structured monthly payments make budgeting easier.
• Access to newer, more efficient cars with warranty cover.
• Soft checks help you shop around without harming your score.

Cons

• Interest and fees increase total cost vs cash.
• Mileage and condition charges can apply to PCP and leasing.
• Lower credit scores may face higher APRs or larger deposits.

Considerations

• Ownership goals - do you want the car outright or flexibility to switch?
• Job stability - changes can affect affordability.
• Exit routes - early settlement and voluntary termination rules.

Read this before you hit apply

• Verify your credit file for errors and update the electoral roll.
• Stress test your budget - could you still afford repayments if rates rise on other borrowing or your income drops?
• Watch provisional licence limitations - expect fewer lender options and closer scrutiny.
• Keep address history consistent across all documents to avoid delays.
• Do not scatter hard applications - use soft checks first, then commit.

One clean, well-documented application beats several rushed ones.

If standard finance is not a fit

• Specialist bad-credit lenders - higher APRs but structured pathways to approval. A larger deposit or guarantor can help.
• Apprentices and early-career applicants - show contract terms, payslips, and training details to demonstrate stability.
• Joint applications - a partner with stronger credit or income can improve affordability.
• Smaller loan or cheaper car - align the request with income thresholds to improve approval odds.
• Build credit first - use a credit builder card sensibly, keep utilisation low, and pay on time for 6-12 months.

Frequently asked questions

Q: What is the minimum age for car finance in the UK? A: 18 is the legal minimum for credit agreements. Some lenders prefer 21 for thinner credit files.

Q: Do I need a full UK driving licence? A: Most lenders require a full licence. A provisional may be accepted by a minority with tighter criteria.

Q: Will a credit check affect my score? A: A soft check will not. A hard check is recorded and may have a small, short-term impact.

Q: How much do I need to earn? A: Many lenders look for £1,000 to £1,500 per month. Some set stepped thresholds by loan size, so match the loan to your income.

Q: Can I get finance with bad credit? A: Yes, but expect higher APRs or a larger deposit. Specialist lenders and joint applications can help.

Q: What documents will I need? A: Proof of ID and UK residency, 3 years of address history, licence, and income evidence like payslips or bank statements.

Make your move with confidence

Start with a soft eligibility check, then compare PCP, HP, and personal loans side by side. Gather documents early, keep your budget realistic, and aim for the shortest affordable term to cut total interest. If your file needs work, build credit and revisit in a few months.

Next step: shortlist three offers using soft searches, then proceed with the best fit.

Important information

This guide provides general information for UK consumers and is not financial advice. Lenders apply their own criteria and rates. Always read the agreement carefully and consider independent advice if you are unsure.