Can you get car finance with bad credit?
Yes, it may be possible to get car finance if you have a poor credit history.
However, your choice of lenders will usually be limited, you could be charged a higher interest rate and there might be a cap on how much you can borrow. This is because lenders generally believe you’re more likely to be at risk of defaulting on your repayments if you have bad credit.
Find a car finance dealCompare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.
Types of car finance for those with bad credit
There are three main car financing options available for those with bad credit, whether you’re buying a new or used car.
Personal Contract Purchase (PCP)
Pay a deposit, then make monthly repayments. At the end of the Personal Contract Purchase agreement, you can choose to return the car or make a final ‘balloon’ payment to keep it.
Hire Purchase (HP)
Pay an initial deposit, then pay off the remaining balance of the car, plus any fees, in monthly instalments. Once the Hire Purchase agreement ends, you’ll own the car outright.
Car loan
Take out an unsecured personal loan to buy the car outright, then repay the car loan plus interest over a fixed period.
Read our guide to car finance vs a bank loan for more information and to help you understand your options.
How much will bad credit car finance cost me?
The cost of your car finance will depend on factors including:
The amount you’re borrowing – the more pricey the car, the more financing will cost you
The APR – the higher the APR, the more interest you’ll pay. The APR also includes any admin fees that may apply to your agreement
The loan term – the longer your loan agreement, the more you’ll pay in interest overall
Your credit score and history – as a general rule, the lower your credit score, the more expensive your car finance is likely to be.
Here’s a hypothetical breakdown of a 36-month HP finance agreement for a £10,000 car.
It shows the difference in the total cost for a person with good credit on a low APR, compared to someone with bad credit on a higher APR.
Credit rating | Good credit score | Bad credit score |
|---|---|---|
Car price | £10,000 | £10,000 |
Deposit | £1,000 | £1,000 |
Representative APR% [1] | 8.9% | 23.9% |
Monthly repayments | £284.34 | £341.96 |
Total interest you’ll pay | £1,236.34 | £3,310.60 |
Option to purchase fee | £200 | £200 |
Total cost of car | £11,436.34 | £13,510.60 |
The figures in this table are for illustrative purposes only.
[1]The actual interest rate you receive will depend on your personal circumstances and lender checks, the amount borrowed and the terms of the loan.
What are the pros and cons of car finance for bad credit?
Pros of bad credit car finance
Allows you to buy a car that might otherwise be outside your budget
Available on a wide range of cars
Can help improve your credit score.
Cons of bad credit car finance
Interest rates are typically higher than if you have a healthy credit history
Your choice of lenders might be restricted
It’s unlikely you’ll be able to secure finance on premium vehicles
How to get car finance with bad credit
Here’s how you might be able to increase your chances of finding a car finance deal with bad credit:
Offer a larger deposit – lenders will feel more secure if you can put down a decent deposit. It’s considered to be less risky for the provider since you won’t be borrowing as much.
Choose a cheaper car – borrowing a smaller sum for a lower-spec model could boost your chances of acceptance (and may get you a lower interest rate).
Find yourself a guarantor – a loan guarantor is someone (usually a close friend or family member) who agrees to cover the loan repayments if you can’t. It reduces the risk for lenders, so they may be more inclined to lend to you.
Improve your credit score – if you can give yourself time to build your credit score, you’ll likely have access to car finance deals with lower interest rates.
Is it possible to get car finance with no credit history?
Yes, it can be possible to get car finance with no credit history, but it could be more expensive. This is because you won’t have any kind of repayment track record that proves you’re a reliable borrower.
How to improve your credit score to get a better car finance deal
Building your credit rating over time is the easiest way to get a cheaper car finance deal in the future. Here are some simple steps you can take to improve your credit score:
Get on the electoral roll
Lenders use the information on the electoral roll to confirm your address is correct. Registering to vote is a crucial step to building your credit history.
Check your credit report for any errors
Make sure it’s accurate and up to date. Any errors can be fixed by contacting the relevant credit reference agency.
Pay your bills on time
If a late or missed payment is marked on your credit report, it can stay there for six years.
If you’re refused credit, don’t keep applying
Multiple applications for credit over a short period of time can damage your credit score. It’s often a red flag for lenders as they may assume you’re desperate for money.
Find out more ways to build your credit score.
Bad credit car finance calculator
Use our car finance calculator to help you work out how much you could potentially afford to borrow, what your monthly repayments would be and the total amount of interest you’ll pay.
You’ll be able to adjust the APR, your credit rating and the loan term to see how it can affect the overall cost of your car financing loan.
FAQs
Can you get car finance if you’ve been declared bankrupt?
You won’t be able to get a loan while you’re going through bankruptcy.
Once your bankruptcy is discharged, it will stay on your credit file for six years. This means you may have trouble getting car finance through a mainstream lender.
You might have more luck with a specialist lender.
Can you get car finance with a CCJ?
It may be more difficult to get car finance with a CCJ (County Court Judgment). Some lenders might offer car finance deals to people with CCJs, but they usually come with specific requirements.
For example, you may have to earn above a certain amount each month and provide evidence of this, such as payslips or bank statements.
Can I get bad credit car finance with no deposit?
You won’t need a deposit if you take out a personal loan to finance your car. You’ll simply receive the money, then pay back the loan over the set term.
You may be able to find a bad credit PCP or hire purchase car finance deal with no deposit, although your options will usually be more limited. Lenders typically reserve their best deals for customers with higher credit scores.
Can I get a 0% car finance deal with bad credit?
It’s very unlikely that you’ll find a 0% car finance deal with bad credit. You typically need a good to excellent credit rating to get interest-free car finance.
Does applying for car finance affect my credit score?
When you make a formal application for car finance, the lender will run a hard credit check that will be marked on your credit file. This may affect your credit score.
However, when you initially search for a car loan through Compare the Market, you'll be subject to a soft credit search, which won't have an impact on your credit score.
Can car finance help me boost my credit score?
As with any type of credit, car finance could help improve your credit score if you pay what you owe on time every month.
If you can show you’re a reliable borrower, it could boost your chances of getting a better deal in the future.
Can I get car finance without a credit check?
No. Lenders won’t offer car finance without running a credit check first.
All regulated lenders have an obligation to lend responsibly. This means running credit and affordability checks to help them assess how reliable you are at paying back money. It also helps them decide whether their financial product is suitable for your circumstances.
Can you refinance a car loan if you have bad credit?
It might be possible to refinance a car loan if you have bad credit, but your options may be limited. And it’s likely you’ll be charged a higher interest rate than someone with a good credit rating. If you're considering refinancing to get a lower interest deal, it's a good idea to first build up your credit score. This could mean you'll be offered better car refinance rates.
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As well as writing for Churchill and Privilege insurance websites, Karen’s CV includes working with M&S, Debenhams, Tesco, Sainsbury’s and John Lewis. With over 20 years of editorial experience for big household names she leads a talented content team with a focus on simplifying personal finance for everybody.
Ele Clark is an award-winning editor who has held leadership roles at Which? and news-stand publications in London and Dubai. She’s appeared across the press and media, including BBC’s Panorama. With almost 20 years’ experience in personal finance, insurance and consumer journalism, she leads a talented team at Compare the Market, creating insightful, accessible content to help people make informed financial decisions.
Charlie is a senior commercial leader with close to a decade of experience across the UK’s leading personal-finance and comparison platforms. Before joining Compare the Market as Head of Commercial in 2024, he held senior commercial roles at TotallyMoney and MoneySuperMarket Group.
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What our expert says...
"Bad credit car finance is often less about whether a deal exists and more about what that deal is likely to cost over time. Where options are limited, the gap between getting approved and getting something that still feels manageable can become much more important."