Bad Credit Car Finance – Tips to Help You Get the Best Deal on a New Car (Whatever Your Credit History)

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September 20, 2021

If you’re looking at getting a car on finance with bad credit, then you may feel like you’re constantly banging your head against a wall and going around in circles trying to finance a brand new car with poor credit.

While it can be difficult to get car finance with a bad credit rating, it is still possible if you’re willing to do the necessary research to find the best car finance deals for poor credit.

In our guide below, you’ll find everything you need to know about poor credit and car leasing, as well as how to improve your credit score to increase your chances of being accepted for car finance. 

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Can I get car finance with bad credit?

Getting car finance with bad credit certainly isn’t as easy as getting car finance with a good credit score, but that doesn’t mean to say that it’s impossible. Bad credit car finance is designed specifically to help those with a poor credit history and you can benefit from various types of car finance deals if you choose the right car finance provider.

How to get a car on finance if you have bad credit

There are specialist lenders who offer car finance to people with bad credit and while it can be a time-consuming and tedious process, if you’re willing to spend time researching competitors and comparing quotes from providers, you’ll likely find a bad credit car finance deal that’s right for you.

Can you get car finance with a CCJ?

A CCJ is a County Court Judgment for debt and when someone takes out a CCJ against you, it means that they claim that you owe them money. Even if you’ve paid off the money you owe, a CCJ will remain on your credit file for up to six years, which could make it more difficult for you to obtain any credit or type of loan in the future.

If you have a CCJ but you want to get car finance, you will likely have to seek financial advice from a professional and you will need to declare your CCJ when applying for car finance with a provider who specialises in bad credit car finance.

Read more: What is a CCJ and how does it impact your credit score?

Types of car finance for bad credit

Below, you can find some of the different types of car finance options that are available for people with poor credit.

Personal loans

This is a type of unsecured loan, so it’s not secured against any of your assets such as your home, for example.

You can borrow a fixed amount of money over an agreed-upon loan term during which you will have to pay back the loan, along with added interest.

You might like: 7 things to know before getting a personal loan

Guarantor loans

A guarantor loan is one of the best ways to obtain car finance for people with bad credit as it involves a second person being financially responsible for repaying your loan if you’re unable to. If you’ve struggled to be accepted for credit in the past, a guarantor loan might be a good finance option for you, but it’s important to be aware of the benefits and drawbacks before you actually commit to one.

Secured loans

This type of loan secures the amount of money that you owe against an asset that you own such as your home. This option is popular with people with bad credit as it usually enables you to borrow a larger amount of money as there is more at risk for you with regards to repaying the loan, so lenders are usually more willing to offer you finance.

Hire purchase

A hire purchase loan involves paying a deposit upfront and then the remaining loan amount with added interest over a certain period of time. It can sometimes be difficult to obtain a hire purchase loan with bad credit, but it’s not entirely impossible.

Personal contract purchase

Also known as PCP, this type of car finance loan involves paying a deposit and then making monthly repayments for a set amount of time. The higher the deposit that you can afford to pay, the lower your monthly repayments will be.

Generally, this is the most flexible type of car finance agreement, because at the end of your contract, you have three options:

  1. Exchange for a new car
  2. Pay a lump sum to officially own the car
  3. Walk away from the deal

Will applying for car finance have an impact on my credit score?

It’s usually possible to compare quotes from different car finance providers without it having any affect on your credit score, but as soon as you start actually applying for car finance, this is when your credit score will be affected.

This is because car finance companies usually perform a hard credit check which shows up on your credit file and this can have an effect on your credit score. A soft query won’t affect your score at all, but a hard search will, so this is something to bear in mind if you were originally thinking about applying for numerous types of car finance.

It’s also important to note that too many applications for any type of finance within a short space of time can affect your credit score, so it’s wise not to make too many credit applications in one go.

You might like: What is a credit check?

How to improve your credit score to increase your chances of being accepted for car finance

Just because your credit rating and history aren’t in the best position right now, that doesn’t mean to say that it will always be bad. If you want to try and improve your credit score before you start applying for car finance loans, check out a few of our top tips for doing so below.

  • Pay all your bills and credit repayments on time.
  • Save for a deposit for a car finance deal so that your monthly repayments are lower.
  • Check your own credit report and score before you start applying for car finance.
  • Compare quotes from different car finance providers and consider the best loan option for you to get the best deal possible.
  • Consider asking someone to be your guarantor if your credit score still isn’t improving, but ensure that you’re both aware of the risks of this option.

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