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Bad credit car finance

If you’re looking for a new set of wheels but your credit score is in a bad way, you might think it’s impossible to find a car finance deal.

The good news is there are car finance options available, even if you have a bad credit history.

Here’s our guide on car finance options for buyers with bad credit.

If you’re looking for a new set of wheels but your credit score is in a bad way, you might think it’s impossible to find a car finance deal.

The good news is there are car finance options available, even if you have a bad credit history.

Here’s our guide on car finance options for buyers with bad credit.

Written by
Sajni Shah
Consumer expert on money and utilities
Posted
6 JUNE 2024
5 min read
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Can you get car finance with bad credit?

Yes, it’s possible to get car finance, even if you have bad credit.

However, your choice of lenders may be limited. Plus, you could be charged a higher interest rate and might be offered a lower borrowing amount. This is because lenders could consider you more at risk of defaulting on your repayments if you have bad credit.

But different car finance options are available. Some of these may be more affordable for people with poor credit or no credit history.

We’ve partnered with Car Finance 247, a leading car finance broker, to help you find the right finance option for your circumstances. Car Finance 247 considers all credit histories, so bad credit shouldn’t stop you driving away with the right deal for you.

Types of car finance for people with bad credit

There are three main car financing options available for people with bad credit.

Personal Contract Purchase (PCP)

Pay a deposit, then make monthly repayments. At the end of the 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 agreement ends, you’ll own the car outright.

Car loan

Take out an unsecured personal loan to buy the car outright, then pay back the loan plus interest, over a fixed period.

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 expensive 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 agreement term – the longer your loan agreement, the more you’ll pay in interest overall.
  • Your credit score and history – typically, 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 own personal circumstances and lender checks, the amount borrowed and the terms of the loan.

Compare 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.

How to get car finance with bad credit

You might not get the best APR out there, but there are some things you can do to increase your chances of getting a car finance deal with bad credit.

Offer a larger deposit – lenders will feel more secure if you can put down a decent deposit. There’s less risk for them, as you won’t need to borrow as much.

Choose a cheaper car – borrowing a smaller amount for a lower-spec model could increase your chances of acceptance and may get you a lower interest rate.

Find yourself a guarantor – a loan guarantor is someone (usually a close family member) who agrees to take over the loan repayments if you can’t. It minimises 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 have better access to car finance deals with a lower interest rate.

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 cheap 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 easily fixed by contacting the credit reference agencies.

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 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 afford to borrow, how much your monthly repayments will 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.

Car finance loan calculator

Don’t let bad credit stop you from driving away with a deal. Explore your car finance options today.

Compare car finance

About CarFinance 247 Limited (Car Finance 247)

CarFinance 247 Limited (Car Finance 247) is one of the UK’s leading car finance brokers uniting buyers, car dealers and finance providers. Car Finance 247 acts as a credit broker, not a lender, which means it will show you and distribute products offered by lenders. Advice is provided by Car Finance 247, who are authorised and regulated by the Financial Conduct Authority (653019).

Car Finance 247 is not part of Compare the Market Limited. Compare the Market receives a % of the commission that our partner Car Finance 247 earns. All applications are subject to lending and eligibility criteria.

Car Finance 247 will not charge you a broker fee should you decide to proceed with a car finance product.

Frequently asked questions

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’s 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, but it’s not impossible. Some lenders may 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.

Is it possible to get car finance with no credit history?

Yes, it’s possible to get car finance with no credit history but it could be more expensive. This is because you won’t have a repayment history that shows lenders you’re a reliable borrower.

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 and HP car finance deal with no deposit, although your options will 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 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 impact your credit score.

However, if you initially apply through our partners Car Finance 247, they’ll run a soft credit search. This can help them match you with lenders that are likely to approve you for car finance. A soft credit search won’t affect your credit score.

Can car finance help me boost my credit score?

As with any type of loan, if you pay what you owe on time each month, car finance could help improve your credit score over time.

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.